India’s Supreme Court has ruled that Tiger Global must pay capital gains tax in India on the $1.6 billion (about ₹14,400 crore) profit it earned from selling its Flipkart stake to Walmart in 2018. The decision marks a major legal shift in how India treats cross-border investments and the use of international tax treaties by foreign investors.
Background Of The Dispute
Tiger Global, a U.S.-based investment firm, held significant shares in Indian e-commerce giant Flipkart through its Mauritius-based entities when Walmart acquired a controlling stake in 2018 as part of a larger $16 billion deal. Tiger Global sold about $1.6 billion worth of shares in that transaction. The firm then claimed it was exempt from paying capital gains tax in India under the India–Mauritius Double Taxation Avoidance Agreement (DTAA), which historically allowed such gains to be tax-free when routed through Mauritius.
What The Supreme Court Decided
The Supreme Court rejected Tiger Global’s argument that the treaty granted it tax exemption, agreeing with the Income Tax Department’s position that the transaction structure was designed for tax avoidance. The bench held that once a sale derives its value from assets in India, the sovereign right of India to tax that income cannot be diluted, even if the shares were held by an entity in a treaty jurisdiction. The court overturned a previous Delhi High Court ruling that had ruled in favour of Tiger Global, reinstating India’s tax claim.
Why The Ruling Matters
The judgment is significant not just for Tiger Global, but for the broader landscape of foreign investment in India. It clarifies that:
- Foreign investors cannot automatically rely on tax treaties to avoid capital gains tax on profits from Indian assets.
- India may scrutinise investment structures that use treaty jurisdictions like Mauritius to claim exemptions if tax avoidance is evident.
- Future deals involving foreign investors and tax treaty benefits may be reviewed more strictly.
Legal experts say the verdict will “set a precedent for how India applies international tax treaties in cross-border deals,” especially for private equity and venture capital transactions. Institutional investors may now reconsider how they structure their investments into Indian firms to ensure compliance.
Impact On Tiger Global And Investors
Tiger Global — one of the earliest and most active backers of Indian startups including Flipkart — now faces a tax liability in India on the gains from this sale. The exact amount of tax payable will depend on the capital gains calculation, penalties and interest as determined by Indian tax authorities. The firm can request a review, but Supreme Court reviews are rarely overturned.
For other foreign investors, the decision signals that tax treaty benefits will not be automatically granted and that investment structures will be analysed for economic substance and genuine commercial purpose.
