Taxation Law

Tiger Global International III Holdings v. Authority for Advance Rulings

W.P.(C) 6764/2020 and connected matters; judgment dated 28 August 2024

Citation: W.P.(C) 6764/2020 and connected matters; judgment dated 28 August 2024
Court: Delhi High Court
Date: 28 August 2024
Bench: Yashwant Varma and Purushaindra Kumar Kaurav JJ.

Facts

Tiger Global International II, III and IV Holdings were companies incorporated and tax-resident in Mauritius.
They pooled investments from numerous investors across different jurisdictions.
Between 2011 and 2015, they acquired shares in Flipkart Private Ltd., a Singapore company.
Flipkart Singapore indirectly held interests in Indian business operations.
In 2018, the Tiger Global entities transferred part of their Flipkart shareholding to Walmart.
They claimed exemption under the India–Mauritius DTAA because their investments had been made before 1 April 2017 and were protected by the treaty’s grandfathering provision.
They approached the Authority for Advance Rulings.
The AAR refused to entertain the applications under section 245R(2), holding that the arrangement was prima facie designed for tax avoidance.
The AAR considered the Mauritius entities to be conduit companies effectively controlled by a US investment manager.
The entities challenged that decision before the Delhi High Court.

Whether the AAR was justified in treating the structure as prima facie tax avoidance.
Whether Mauritius tax residency certificates and the treaty grandfathering provision protected the transaction.
Whether foreign investment management, common directors and fund movement established lack of economic substance.
Whether beneficial ownership was an unstated requirement for the capital-gains exemption.

A treaty must be interpreted according to its text, object and negotiated anti-abuse provisions.
A tax residency certificate is strong evidence of treaty residence, although fraud or sham may justify deeper inquiry.
Treaty shopping is not, by itself, illegal under the older treaty framework.
Courts should not add beneficial-ownership requirements where the relevant capital-gains article does not contain them.
The AAR’s section 245R(2) inquiry concerns whether the transaction is prima facie designed for tax avoidance.
Commercial structures and corporate personality cannot be ignored merely because:
investment decisions receive external professional advice;
directors are located in different jurisdictions;
funds ultimately originate from investors outside Mauritius.
A grandfathering clause must be given meaningful effect.

The High Court found that the AAR had made a basic factual error by treating Tiger Global Management LLC as the parent or holding company.
It was an investment manager and had not itself funded or owned the Mauritius entities.
The entities:
held Category 1 global-business licences;
pooled investments from over 500 investors in numerous jurisdictions;
had existed for several years;
incurred expenditure in Mauritius;
held and managed investments through their corporate structure.
The Court found no evidence showing that sale proceeds were legally required to be transmitted to the US investment manager.
External investment advice did not mean that the boards had surrendered their legal decision-making powers.
The shares were acquired before the treaty’s grandfathering cut-off date.
Treating every pre-2017 Mauritius investment as abusive would substantially defeat the negotiated protection.
The Court also held that the treaty’s capital-gains provision did not expressly impose a beneficial-ownership condition.
Mere suspicion, fund routing and commercial influence were insufficient to establish a sham or conduit arrangement.

The Delhi High Court allowed the writ petitions.
It quashed the AAR’s order and held that the transaction was not designed for tax avoidance.
It accepted the assessees’ treaty-exemption claim and granted consequential relief.
Current Legal Status
On 15 January 2026, the Supreme Court reversed the Delhi High Court.
It held that a tax residency certificate is an eligibility document, not necessarily conclusive proof.
It restored the AAR’s ability to refuse the applications on the prima facie tax-avoidance ground and upheld deeper examination of residence, substance, control and treaty abuse.
The 2024 High Court judgment is therefore no longer the final legal position.