Supreme Court Delivers Landmark Tax Ruling on Tiger Global's Flipkart Stake Sale
The Supreme Court of India has made a decisive ruling. It states that Tiger Global's $1.6 billion stake sale in Flipkart to Walmart is subject to Indian taxes. This judgment overturns a previous Delhi High Court decision. It denies the venture capital firm benefits under the India-Mauritius Double Taxation Avoidance Agreement (DTAA).
Legal Battle Over 2018 Transaction
Tiger Global engaged in a prolonged legal dispute with Indian tax authorities. The conflict centered on the 2018 sale by its Mauritius-based entities to Walmart. The investment firm argued for exemption under the DTAA's grandfathering clause. This clause protected investments made before April 1, 2017.
Tax authorities rejected this claim. They contended that the Mauritius entities lacked independent decision-making power. Control, they asserted, resided with Tiger Global Management LLC in the USA.
The Authority for Advance Rulings (AAR) supported the tax department in 2020. It found the transaction was primarily structured for tax avoidance. The Delhi High Court later revoked this order in August 2024, calling it arbitrary. The Supreme Court has now reversed the High Court, reinstating the tax liability.
Court Rejects Treaty Benefits for Lack of Substance
Justice R Mahadevan delivered the Supreme Court's opinion. He clarified that the DTAA applies only to movable property of a permanent establishment directly owned in Mauritius. The Tiger Global transaction did not meet this criterion.
The court emphasized that a Tax Residency Certificate (TRC) from Mauritius is not conclusive. Indian authorities can scrutinize entities suspected as conduits for tax avoidance. Genuine economic substance and autonomous decision-making in the treaty jurisdiction are now essential.
Implications for Investors and Startups
This ruling arrives during a significant funding downturn for Indian startups. According to Tracxn, tech startup funding fell to $10.5 billion in 2025, a 17% drop from 2024.
Amit Maheshwari, Managing Partner at AKM Global, highlights the judgment's broad impact. It affects private equity, venture capital, and offshore investment structures. Investors can no longer rely mechanically on TRCs. They must demonstrate real commercial rationale in treaty jurisdictions.
Himanshu Sinha, Partner at Trilegal, warns of elevated tax uncertainty and litigation risk. Exit planning and valuations may require radical reassessment. Tax insurance and indemnities could become scarcer and more expensive.
Amit Baid, Head of Tax at BTG Advaya, calls this a major shift. It strengthens the tax department's hand in reassessment proceedings. The ruling impacts funds using Mauritius and Singapore structures, even for pre-2017 investments.
Funding Trends Amid Regulatory Shift
Startup funding shows mixed trends across stages:
- Seed-stage funding dropped 30% to $1.1 billion in 2025.
- Early-stage funding rose 7% to $3.9 billion, indicating investor confidence in growth-ready startups.
- Late-stage funding declined 26% to $5.5 billion.
The Supreme Court's decision signals India's alignment with global anti-abuse standards. It marks a pivotal moment for cross-border investments. The startup ecosystem now navigates a new tax landscape with heightened scrutiny and evolving rules.
