Supreme Court Holds Tiger Global Liable to Pay Capital Gains Tax on Flipkart Exit

Tiger Global exited its investment in Flipkart in 2018 by selling its stake to Walmart for approximately USD 1.6 billion. The investment was held through a Mauritius-based company, and Tiger Global claimed exemption from capital gains tax under the India-Mauritius Double Taxation Avoidance Agreement (DTAA).

The Income Tax Department challenged the claim, saying that the Mauritius structure was created mainly to avoid Indian capital gains tax on income arising from an India-centric business. The matter finally reached the Supreme Court.

Issues Before SC: Whether Tiger Global was entitled to claim a capital gains tax exemption under the India-Mauritius DTAA on the Flipkart stake sale, or whether the transaction was taxable in India as a tax-avoidance arrangement.

SC Ruled: The Supreme Court ruled in favour of the Income Tax Department and held that capital gains arising from Tiger Global’s USD 1.6 billion exit from Flipkart in 2018 are taxable in India. The Court denied treaty protection under the India-Mauritius DTAA, agreeing with the Revenue that the transaction structure was designed primarily to avoid Indian tax liability. The Court observed that the share sale arrangement between Tiger Global and Walmart constituted a tax-avoidant structure and, therefore, could not avail treaty benefits. It reiterated that while tax treaties aim to prevent double taxation, they cannot be used as instruments for tax avoidance.

The Court held that capital gains generated from an India-centric business cannot escape taxation merely through offshore structuring. Therefore, Tiger Global was held liable to pay capital gains tax in India on the Flipkart-Walmart transaction.

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