Impact of Supreme Court’s Tiger Global ruling on foreign investors
In a significant blow to foreign investors leveraging offshore structures, the Supreme Court of India has ruled that US-based investment firm Tiger Global must pay capital gains tax on its US$1.6bn (billion) stake sale in Flipkart to Walmart in 2018. The verdict overturned a Delhi High Court decision from August 2024 that had exempted the firm, labelling the transaction an 'impermissible tax avoidance arrangement'. The case stems from Tiger Global's initial investment in the Indian e-commerce giant Flipkart back in 2009. The firm sold a substantial portion of its stake as part of Walmart's US$16bn acquisition of Flipkart nine years later. To execute the deal, Tiger Global routed the transaction through entities based in Mauritius, invoking exemptions under the India-Mauritius double taxation avoidance agreement (DTAA) and presenting tax residency certificates (TRCs) as proof of legitimacy. However, Indian tax authorities contested this setup in 2020 through the authority for advance rulings (AAR), asserting that the Mauritius-based structure lacked genuine economic substance and was primarily engineered to evade taxes. Although the Delhi High Court sided with Tiger Global in 2024, the revenue department appealed, leading to Supreme Court hearings that began in January 2025.
This decision reinstates the original tax demand on Tiger Global and is expected to have far-reaching implications for cross-border mergers and acquisitions (M&A) in India. Legal experts have described it as a 'watershed moment' that could heighten scrutiny on similar offshore holding structures used by international investors, potentially reshaping foreign investment strategies.
The ruling also bolsters India's efforts to combat treaty shopping, where investors exploit tax agreements between countries to minimise liabilities. Analysts suggest it may influence ongoing and future cases involving international tax pacts, while some express concerns over its potential to dampen investor sentiment, amid India's push for economic growth.
Tiger Global reportedly made an overall gain of US$3.5bn on an investment of US$1.2bn.
