The Supreme Court has stayed the High Court judgment in favor of Mauritius-based investment arm Tiger Global International Holdings. The case pertains to the sale of Flipkart Singapore’s stake to Walmart for Rs 14,500 crore in 2018, on which capital gains were made in India.
The Supreme Court has said in its order, ‘There is a need to seriously consider the issues raised in the petition. During this period, there will be a stay on the operation, implementation and execution of the disputed decision and order passed by the High Court. The next hearing on this matter in the Supreme Court will be on February 14.
Tiger Global’s eligibility for capital gains tax exemption under the India-Mauritius Double Taxation Avoidance Agreement (DTAA) was confirmed by a High Court judgment in August 2024. Earlier, the Authority of Advance Rulings (AAR) had refused to give the benefit of the treaty to Tiger Global. AAR’s contention was that since this transaction was done to avoid tax, the India-Mauritius DTAA does not apply to such indirect transactions.
However, the Delhi High Court overturned the AAR’s ruling citing the grandfathering provisions of the DTAA and Tiger Global’s tax residency certificate (TRC).
The high court cited Section 13(3A) of the DTAA to say that gains from shares purchased before April 1, 2017, are exempt from Indian taxes. The Court cited the Supreme Court’s decision in Central Government vs. Azadi Bachao Andolan to emphasize that the TRC issued by Mauritius is sufficient evidence of residency and entitles to treaty benefits. It rejected the argument that Tiger Global’s Mauritius-based entities lacked ‘commercial substance’ and highlighted its compliance with Mauritius laws.
Amit Maheshwari, tax partner at tax and advisory firm AKM Global, said the apex court’s decision will have ramifications across India and highlights the seriousness of the matter from a tax perspective. He said, ‘There are several key areas which need serious attention.’