🔥 A Landmark Ruling That Redefines Tax Treaties

In January 2026, the Supreme Court of India delivered a landmark judgment that has already been hailed as a turning point in international taxation. The Court ruled that capital gains earned by Tiger Global from the sale of Flipkart shares to Walmart are taxable in India, despite Tiger Global’s reliance on the India–Mauritius tax treaty.

This decision overturned a favorable High Court ruling for Tiger Global and reinstated the principle that India has the right to tax gains arising from Indian assets, even when routed through offshore jurisdictions.

🌟 What This Ruling Really Means

The verdict is not just about one transaction—it represents a paradigm shift in India’s approach to tax treaties and cross-border investments.

Key Principles Established:

• Substance Over Form: The Court emphasized that economic reality matters more than legal structuring. If an entity exists only on paper, it cannot claim treaty benefits.
• Treaty Benefits Are Not Automatic: Holding a Tax Residency Certificate (TRC) from Mauritius or any treaty country is insufficient if the entity lacks genuine commercial substance.
• Conduit Structures Will Be Ignored: Shell entities without real operations, employees, or decision-making power can be disregarded for tax purposes.
• GAAR Enforcement: India’s General Anti-Avoidance Rule (GAAR) gains teeth, allowing authorities to override treaty protections if the primary intent of a structure is tax avoidance.

This ruling signals India’s determination to prevent treaty shopping and ensure that tax treaties are used for genuine business purposes, not as loopholes.

🎯 The Tiger Global–Flipkart Deal Explained Simply

📌 The Transaction

• Tiger Global invested in Flipkart through Mauritius-based entities.
• These entities held shares in Flipkart’s Singapore arm.
• In 2018, Walmart acquired Flipkart, and Tiger Global sold its stake, earning substantial capital gains.

📌 The Core Question

Could Tiger Global claim tax exemption under the India–Mauritius treaty, citing residency and “grandfathering” provisions that historically shielded such transactions?

📌 The Supreme Court’s Answer

No. The Court ruled that treaty benefits cannot be claimed if the structure lacks commercial substance and exists primarily to avoid tax. Authorities are empowered to look beyond paperwork and examine the true nature of the transaction.

📊 Why This Matters for Investors, Startups & Funds

1. VC & PE Structures Under Review

Venture capital and private equity funds often use offshore holding companies in Mauritius, Singapore, or Cayman Islands. Post‑verdict, these structures must demonstrate real economic presence—offices, employees, and decision-making power.

2. Stricter Exit Planning

Tax-free exits via treaty jurisdictions are no longer guaranteed. Investors must factor in Indian tax exposure when planning exits, potentially altering deal valuations.

3. M&A Deal Impact

Future acquisitions of Indian companies may involve higher due diligence and revised terms, as buyers and sellers account for possible tax liabilities.

4. Transparency in Investment

Experts believe this judgment will encourage substance-driven structures, reducing reliance on shell companies and improving transparency in India’s investment ecosystem.

🔮 The Takeaway

The Tiger Global–Flipkart verdict is a defining moment in India’s tax jurisprudence. It sends a clear message to global investors:

• India will prioritize substance over form.
• Offshore entities created purely for tax benefits will not be shielded by treaties.
• GAAR is now a powerful enforcement tool.

This ruling strengthens India’s anti-avoidance framework and sets a new benchmark for interpreting international tax treaties. For investors, it means greater scrutiny, but also a more transparent and predictable environment in the long run.