Tiger Global liable to pay tax on 2018 Flipkart deal: Supreme Court

Core Viewpoint - The Supreme Court upheld the Indian tax department's claim that capital gains from Tiger Global's $1.6 billion exit from Flipkart in 2018 are taxable in India, reversing a previous ruling by the Delhi high court [1][2][3] Tax Implications - The ruling may alter how India taxes foreign investors and interprets the India-Mauritius Double Taxation Avoidance Agreement (DTAA) [2] - The Supreme Court emphasized that the real control and decision-making of Tiger Global's investments were in the US, indicating that the Mauritius entities were merely routing vehicles [5][20][23] Treaty Changes - The India-Mauritius tax treaty was amended in 2016 to prevent tax avoidance, stating that shares acquired on or after April 1, 2017, would be taxed in India, while older investments were "grandfathered" [4][18] - The court ruled that tax residency certificates alone are insufficient for tax exemption, and the tax department can investigate the actual control behind the investment structure [6][8] Future Implications - The verdict opens the door for re-examination of past exits and could lead to increased scrutiny of exits involving Mauritius-based entities [10][12] - Investments made before March 31, 2019, that benefited from the DTAA will be affected, with different tax rates applicable based on the acquisition date [11][12] Industry Impact - Private equity and foreign portfolio investors need to reassess their investment structures and consider potential tax litigation risks [13] - The ruling signifies a dilution of the tax residency certificate's importance and highlights the use of general anti-avoidance rules (GAAR) in India's tax treaty jurisprudence [14]