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India\u2019s top court has ruled against Tiger Global in a tax case stemming from its Flipkart exit during Walmart\u2019s 2018 takeover<\/a>, a decision that strengthens New Delhi\u2019s ability to challenge offshore treaty structures and could raise tax risk for global funds counting on predictable exits from one of the world\u2019s fastest-growing major markets.<\/p>\n On Thursday, the Indian Supreme Court backed the tax authorities in a dispute over whether Tiger Global could use its Mauritius-based entities to claim protection under the India\u2013Mauritius tax treaty and avoid paying capital gains tax in India on profits linked to its exit in the Walmart\u2013Flipkart deal. The decision set aside a 2024 Delhi High Court ruling that had overturned a 2020 order by the Authority for Advance Ruling, which had found the firm was, prima facie, avoiding tax and therefore not eligible for treaty relief.<\/p>\n The ruling is being closely watched by investors, as it strengthens India\u2019s hand in challenging offshore \u201ctreaty-routing\u201d structures that have long been used to reduce tax on high-value exits. It could also raise uncertainty over how future cross-border deals are structured and priced, at a time when foreign funds are counting on India as a key growth market.<\/p>\n In its verdict, a two-judge bench said<\/a> (PDF) that when a transaction appears, at first glance, to be designed to avoid income tax, India\u2019s advance-ruling mechanism cannot be used to seek protection.<\/p>\n Tiger Global first invested in India\u2019s e-commerce firm Flipkart in 2009 with an initial $9 million investment<\/a>, before increasing its exposure to about $1.2 billion<\/a> over multiple funding rounds, TechCrunch had reported earlier. The firm later sold its stake to Walmart for about $1.4 billion in 2018<\/a>.<\/p>\n The tax dispute centers on how Tiger Global structured that investment \u2014 through entities in Mauritius \u2014 and whether those vehicles could claim protection under the India\u2013Mauritius tax treaty to shield capital gains from Indian tax.<\/p>\n While selling Flipkart\u2019s stake during Walmart\u2019s $16 billion deal, Tiger Global sought a certificate allowing no tax to be withheld, arguing that because the shares were acquired before April 1, 2017, the gains were exempt from Indian capital gains tax under a \u201cgrandfathering\u201d clause, protecting older investments from the newer tax regime, in the India\u2013Mauritius double taxation avoidance agreement. Indian tax authorities rejected the request in 2020, questioning the offshore structure chosen by the investment firm.<\/p>\n The Supreme Court bench framed the dispute as an issue of sovereign taxing powers, warning against structures that are designed primarily to dilute that authority.<\/p>\n \u201cTaxing an income arising out of its own country is an inherent sovereign right of that country,\u201d the bench said, adding that \u201cany dilution of this power through artificial arrangements is a direct threat to its sovereignty and long-term national interest.\u201d<\/p>\n The judgment should be read as a caution against aggressive tax planning rather than a wholesale dismantling of the India\u2013Mauritius treaty framework, Ajay Rotti, a tax expert and founder and CEO of tax advisory firm Tax Compass, wrote<\/a> on X. He said the decision reinforces a broader shift toward \u201csubstance over form,\u201d signaling treaty protection may not apply automatically where offshore entities lack real commercial activity.<\/p>\n Tiger Global did not respond to a request for comment.<\/p>\n The firm can seek a review of the verdict, though such petitions are rarely successful.<\/p>\n<\/div>\n