India’s Supreme Court has put an end to years of speculation over one of the most high-profile startup exits in the country. In a case related to Tiger Global’s 2018 sale of its Flipkart stake during Walmart’s $16 billion acquisition of the e-commerce giant, the apex court has ruled that the US-based investment firm must pay capital gains tax on the transaction.
Notably, Tiger Global had routed its Flipkart holdings through Mauritius-based entities, claiming protection under the India-Mauritius Double Taxation Avoidance Agreement (DTAA). While the Delhi High Court had initially ruled in favour of Tiger Global in 2024, giving it temporary relief from Indian taxes, the Supreme Court concluded that the investment structure was primarily a mechanism to avoid tax, rather than a genuine treaty-protected investment.
The dispute goes back to 2018, when Tiger Global sold its shares in Flipkart’s Singapore-based parent company during Walmart’s acquisition. The firm argued that its capital gains were exempt under the India-Mauritius tax treaty, as its investments were routed through Mauritius-based companies. However, the Authority for Advance Rulings (AAR) had rejected this claim, stating that the Mauritian entities were simply ‘conduit’ companies without real economic activity. According to the AAR, the structure was designed primarily to minimise Indian tax liability, rather than represent genuine business operations in Mauritius.
Following the AAR decision, Tiger Global challenged the ruling in the Delhi High Court, which in 2024 sided with the investment firm. The High Court observed that capital gains on shares acquired before April 1, 2017, fell under ‘grandfathering’ provisions of the tax treaty, which generally shielded such gains from Indian taxation. The court held that Tiger Global’s investment met the formal requirements for treaty protection, effectively granting it a temporary exemption from Indian capital gains tax.
But now, the Supreme Court has overturned this judgment, siding with the Indian tax authorities. The court said that the legal structure of an investment alone does not determine whether it qualifies for treaty benefits. According to the bench, what matters more is the actual economic purpose of the transaction. Since Tiger Global routed its investment through Mauritius primarily to obtain tax benefits, the court ruled this constituted treaty abuse. The decision also made it clear that India has the right to tax profits from transactions that effectively take place in the country, even if foreign companies use intermediate entities.
While the exact tax amount has not been disclosed, Tiger Global is said to have made billions of dollars from its Flipkart stake sale. Most importantly, this latest decision could have wide-ranging implications for India’s startup and investment ecosystem, as foreign funds that use Mauritius or other treaty jurisdictions to structure investments may now face stricter scrutiny.
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