India: The Tiger Global Ruling - A Moment of Reckoning for Foreign Investment Structures in India

The Tiger Global ruling by the Indian Supreme Court marks a decisive shift in how India’s highest court views offshore investment structures into the country. While the decision turns on its facts, the broader message is unmistakable: treaty entitlement and structural defensibility will increasingly depend on real substance and decision-making. Foreign investors investing into India would be well advised to treat this judgment as a trigger to proactively review and recalibrate their India-inbound structures.

The Ruling

The Supreme Court of India held that treaty benefits including the grandfathering benefit under the India–Mauritius Tax Treaty can be denied where an arrangement is found to be an impermissible tax‑avoidance structure, as the Indian domestic anti abuse provisions (viz. General Anti Avoidance Rules) and requirement therein of demonstrating economic substance, can be invoked to deny treaty benefits notwithstanding the availability of a Tax Residency Certificate, where the arrangement lacks commercial substance.

Background

• Tiger Global invested in Flipkart India through a layer of Mauritius and Singapore entities. The investment was made before April 2017. Tiger global later exited during Walmart’s acquisition of Flipkart. The sale was by a Mauritius company selling the shares of the Singapore holding company which ultimately held Flipkart India. The said Mauritius company claimed tax exemption under the India–Mauritius tax treaty on the gains arising out of such sale of shares.
• Under the Indian domestic tax laws, such indirect transfer of shares of an India company would have been taxable in India.
• The India–Mauritius Tax Treaty was revised in May 2016, pursuant to which the taxing rights over capital gains—which earlier vested exclusively with the jurisdiction of residence of the alienator—were also shifted to the source jurisdiction. However, investments and structures established prior to April 2017 were granted grandfathering protection under the revised treaty. Similar benefit of grandfathering was also extended under the domestic General Anti Avoidance Rules (GAAR) to investments made prior to April 2017.
• Tiger Global approached Authority of Advance Ruling (AAR) in India to seek a ruling on the taxability under the India – Mauritius Tax Treaty.
• Indian tax authorities challenged this, alleging the structure was set up mainly to avoid tax, leading to an extensive litigation from the AAR to the High Court and finally to the Supreme Court of India.

Outcome at various judicial levels in India

• AAR (Advance Ruling Authority) rejected Tiger Global’s request for an advance ruling stating that the investment structure prima facie was a tax avoidance arrangement.
• The High Court however overturned the ruling of AAR and held that Tiger Global was entitled to treaty benefits. The High Court also held that the Tax Residency Certificate should be considered to be a valid proof of residency and in any case the investments held by Tiger Global was grandfathered under the India- Mauritius DTAA.
• Supreme Court (the Apex court of India) ultimately reversed the High Court order and sided with the tax department, denying the benefits under the India-Mauritius Tax Treaty to Tiger Global, applying the Indian anti-abuse rules.

Key Observations of the Indian Supreme Court

1. Tax Residency Certificate is not a conclusive of proof of residency - Merely having a Mauritius Tax Residency Certificate is not conclusive to determine residency under the applicable Tax Treaty. 
2. Substance matters more than form - Where a company is incorporated is not of so much importance as to where the decisions are actually made.
3. The domestic GAAR can override tax treaty benefits - Even where investments were made prior to April 2017, GAAR may apply to exits or arrangements executed after that date if they are found to be impermissible avoidance arrangements.
4. Indirect transfers don’t get grandfathering under the DTAA - The protection under the India–Mauritius DTAA applies mainly to direct holding of Indian shares. This was an indirect transfer (Mauritius company selling Singapore shares that derived value from India), so no grandfathering benefit under the India – Mauritius Tax Treaty was available. 
5. Burden of proof is on the taxpayer - Once the tax department establishes a prima facie case of tax avoidance, the burden shifts to the taxpayer
6. Treaties are to avoid double taxation, not double non‑taxation - Tiger Global was effectively trying to avoid tax on the exit (no tax in India and Mauritius), which goes against the spirit of tax treaties.

Developments post the Supreme Court decision

On 31^st March 2026, the Government of India issued two Notifications amending the grandfathering rules for GAAR. The overall impact of the said Notifications is as under:

1. From FY 2025-26 onwards, GAAR proceedings cannot be initiated in respect of investments in India which have happened prior to 1^st April 2017.
2. From 31^st March 2026 onwards, the Indian Tax Office cannot initiate GAAR proceedings even for years prior to FY 2025-26 in respect of investments in India which have happened prior to 1^st April 2017.
3. Any ongoing GAAR proceedings initiated prior to 31^st March 2026 for years prior to FY 2025-26 or past adjudications involving GAAR would continue to be governed by the principles laid down by the Supreme Court in the case of Tiger Global.

Why this matters

• Old Mauritius grandfathered structures for India investment are no longer “safe by default.” – irrespective of grandfathering benefits under the DTAA and GAAR provisions, the arrangements may be still be scrutinised from the lens of tax avoidance / abusive structures under GAAR, while the Tax Officer may not be permitted to initiate fresh GAAR proceedings in respect of investments made prior to 1^st April 2017, basis the recent Notifications issued by the Indian Government.
• Tax Residency Certificates under Indian tax treaties by itself won’t be conclusive proof for residency — real substance and effective control would matter.
• GAAR and judicial anti‑avoidance rules (JAAR)  give wide powers to tax authorities.
• Indirect shareholding structures for investment in India can be especially questioned. Past transactions could be scrutinised if the review and reassessment timelines are still open.