Tiger Global Ruling: Supreme Court on TRCs and Treaty Relief

Tiger Global Ruling: Supreme Court on TRCs and Treaty Relief

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  • Tiger Global Ruling: Supreme Court on TRCs and Treaty Relief

In a recent judgement, the Supreme Court in the case of Authority for Advance Rulings (Income-tax) vs Tiger Global International II Holdings [2026] 182 taxmann.com 375 (SC)[1] has revisited the scope of treaty protection in cross-border investment structures, particularly in the context of the sufficiency of Tax Residency Certificates (TRCs), the interpretation of grandfathering provisions under tax treaties, and the application of domestic anti-avoidance rules such as GAAR. The decision is significant as it has the potential to alter long-standing assumptions regarding treaty entitlement and has wide-ranging implications for investments structured through intermediary jurisdictions.

 

I. Background

 

The matter involving the taxation of the sale of shares of Indian companies, or the sale of shares of overseas companies deriving value substantially from Indian companies, has been litigated for many years. In this context, two judgements of the Indian Supreme Court, UOI vs Azadi Bachao Andolan [2003] 263 ITR 706 (SC) and Vodafone International Holdings B.V vs UOI [2012] 341 ITR 1 (SC), have a significant place in shaping the jurisprudence on this subject. The fact patterns in both judgements involved investments originating from or routed through a Mauritius-registered entity or fund, which claimed tax exemptions under the applicable tax treaties as they stood prior to 1 April 2017. They further raised the issue of whether a Tax Residency Certificate (TRC) issued by the Mauritian tax authorities should be considered sacrosanct or whether Indian authorities can challenge the same. 

The issues arising in the present Tiger Global case emerge against this jurisprudential backdrop and involve a broadly similar investment structure and treaty-related controversy.
 

[1] Civil Appeal No. 262, 263, 264 of 2026

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II.Facts of the case

  • 01

    Tiger Global International II Holdings, Tiger Global International III Holdings, and Tiger Global International IV Holdings (hereinafter collectively referred to as “TGI” for the sake of brevity) are private companies limited by shares, incorporated under the laws of Mauritius, regulated by the Financial Services Commission in Mauritius, and have been granted a Category I Global Business License. These companies hold Tax Residency Certificates (TRCs) issued by the Mauritian Revenue Authorities confirming their tax residence in Mauritius.

  • 02

    TGI engaged the services of Tiger Global Management LLC, a company incorporated in the USA, to provide services in relation to its investment activities. It also held a PAN issued by the Indian income tax authorities.

  • 03

    TGI held shares of Flipkart Private Limited, a company incorporated in Singapore, which were acquired by TGI over many years between October 2011 and 2015. The Singapore company thereafter invested in multiple companies in India, deriving its substantial value from investments in Indian companies.

  • 04

    TGI sold the shares of the Singapore company to a Luxembourg company as a part of the acquisition of Flipkart by Walmart Inc., a company incorporated in the USA.

  • 05

    Prior to consummation of the transaction, TGI applied for a nil withholding certificate; however, the tax authorities denied nil withholding on the ground that TGI was not eligible for tax treaty relief. While doing so, the tax authorities contended that TGI could not be considered a tax resident of Mauritius since the management and control of the TGI entities were not with Mauritian directors but with Mr. Charles P. Coleman, a U.S.- based individual disclosed as the beneficial owner and exercising real control and management over the Tiger Global group entities.

  • 06

    Since the matter of taxation now involves uncertainty, TGI approached the Authority of Advance Ruling (AAR). The question raised before the AAR was whether the transaction involving the sale of shares of a Singapore company by TGI was taxable in India.

  • 07

    The AAR rejected TGI’s applications, holding that the “head and brain” of the companies was outside Mauritius and that the structure was primarily for availing tax benefits and lacked genuine economic substance. Aggrieved by the AAR ruling, TGI approached the Delhi High Court.

  • 08

    The High Court relied on the judgements in Azadi Bachao Andolan and Vodafone and held that the mere fact that an entity is located in Mauritius, or that investments were routed through that jurisdiction, cannot by itself lead to an adverse inference; further, the High Court held that the TRC issued by Mauritian authorities must be respected and that transactions prior to 1 April 2017 stood grandfathered under the amended India–Mauritius tax treaty.

  • 09

    Aggrieved by this decision, the tax authorities approached the Supreme Court.

III. Key arguments of the judgement

 

Arguments presented on behalf of the tax authorities:

  • Indian tax authorities are entitled to examine whether TGI is a resident of the other contracting state, namely, Mauritius, by applying the domestic law of that state.
  • As the source state vested with sovereign taxing powers, India retains the authority to determine taxability under its domestic law.
  • A TRC constitutes only prima facie evidence of residence and cannot override the principle of “substance over form”. The test of control and management is central to examining the genuineness of residence and the bona fides of the transaction.
  • It was also contended that the General Anti-Avoidance Rules (GAAR) override DTAA benefits where impermissible avoidance arrangements are found.
  • It was also argued that once GAAR came into effect on 1 April 2017, any income-earning transaction forming part of an arrangement must undergo scrutiny under the GAAR provisions, regardless of whether the underlying investment or structure originated prior to that date.

 

Arguments presented on behalf of the TGI:

  • The enquiry initiated by the Indian Tax Department into the “head and brain” of the respondent companies was not on the footing that their corporate existence should be disregarded or that they should be treated as mere conduits.
  • It was also argued that Circular No. 789 regarding TRC and its supremacy was still intact, and that once a TRC is issued, it cannot be disregarded.
  • Domestic law doctrines such as “lifting the corporate veil” or “substance over form” cannot be invoked to deny treaty benefits in the absence of express treaty language to that effect.
  • It was also argued that Indian authorities are precluded from going behind the TRC issued to GBL holders except in cases where dual residence triggers Article 4(3).

 

IV. Supreme Court’s observations and outcome of the case

 

The benefit of taxation of alienation of shares only in the country of residence, as available in Article 13(4) of the India-Mauritius tax treaty, requires that the taxpayer must not only qualify as a resident of Mauritius but also establish that the movable property or shares forming part of the subject matter of the transaction are directly held by such resident entity. An indirect sale of shares would not, at the threshold, fall within the treaty protection.

The object of the DTAA is to prevent double taxation and not to facilitate avoidance or evasion of tax. Therefore, for the treaty to be applicable, the taxpayer must prove that the transaction is taxable in its state of residence.

Circulars issued earlier, though binding on the Revenue at the time of their issuance, operate only within the legal regime in which they were issued and cannot override subsequent statutory amendments. After the amendment has come into effect, there can be no doubt whatsoever that a TRC alone is not sufficient to avail the benefits under the tax treaty, and reliance upon earlier judgements dealing with circulars issued in the pre-amendment regime cannot ipso facto come to the aid of TGI.

Once taxability has been established on the basis that the shares sold derive their value from shares or assets in India, the AAR, by basing its reasoning for the rejection of the taxpayer’s claim for exemption only on the ground that the sale of shares was not that of an Indian company, may have undertaken an enquiry in the wrong direction.

The TRC is not binding on any statutory authority or court unless the authority or court enquires into it and comes to its own independent conclusion.

The Supreme Court agreed with the procedure followed by the tax authorities as below:

  • First, taxability is established under Section 9(1)(i) of the Income Tax Act.

  • The availability of treaty relief is contested by challenging the residency claim in view of the prima facie finding that effective management and control were not in Mauritius.

TGI seeks exemption from the Indian income tax while, at the same time, contending that the transaction is also exempt under Mauritian law, which runs contrary to the spirit of the DTAA and presents a strong case for the Revenue to deny the benefit, as such an arrangement is impermissible.

Though it is permissible in law for a taxpayer to plan their transaction to avoid the levy of tax, the mechanism must be permissible and in conformity with the parameters contemplated under the provisions of the Act, rules, or notifications.

In view of all the above, the Supreme Court overturned the judgement of the High Court and allowed the appeal filed by the tax department. 

 

V. Advith’s Comments

 

This is a very significant judgement in the interplay between the sufficiency of TRC for treaty benefits, the interpretation of grandfathering provisions in the treaty and GAAR.

While there are multiple questions that remain open on the conclusions drawn, the judgement is expected to have significant implications.

Tax authorities might try to apply the “head and brain” test for every ownership structure. While having commercial substance to ownership structuring is essential, a blanket application of this approach could lead to unintended results. 

Taxpayers believing that a TRC suffices the test of residence to avail treaty benefits would have to start rethinking. 

In cases where there is double non-taxation in general, whether this judgement will have implications or only when the anti-avoidance test fails, and whether tax authorities apply this rule, remains to be seen. 

The Supreme Court, in applying the sovereignty principles to come up with the conclusion in this judgement, has taken an approach that is very surprising. It seemed as though this was the biggest consideration. 

The role of GAAR in cross-border transaction structuring significantly increases after this judgement. Therefore, one must tread cautiously while putting in place investment structures which, on paper, might look commercially valid but in reality, have a different story to tell. 

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