In The Authority for Advance Rulings (Income Tax) & Ors. vs. Tiger Global International Iii Holdings (2026), Supreme Court’s Division Bench of Justices J.B. Pardiwala and R. Mahadevan delivered a j15-page long judgement dated January 15, 2026, wherein it concluded:”50. In our view, once it is factually found that the unlisted equity shares, on the sale of which the assessees derived capital gains, were transferred pursuant to an arrangement impermissible under law, the assessees are not entitled to claim exemption under Article 13(4) of the DTAA. The Revenue has proved that the transactions in the instant case are impermissible tax-avoidance arrangements, and the evidence prima facie establishes that they do not qualify as lawful. Consequently, Chapter X-A becomes applicable. The applications preferred by the assessees relate to a transaction designed prima facie for tax avoidance and were rightly rejected as being hit by the threshold jurisdictional bar to maintainability, as enshrined in proviso (iii) to Section 245R(2) [of the Income-tax Act]. Accordingly, capital gains arising from the transfers effected after the cut-off date, i.e., 01.04.2017, are taxable in India under the Income Tax Act read with the applicable provisions of the DTAA. The judgment of the High Court therefore deserves to be set aside. 51. In the result, all the appeals are allowed and the impugned judgment of the High Court is set aside. There shall be no order as to costs.” 52. Pending application(s), if any, shall stand disposed of.”
Notably, India has Double Taxation Avoidance Agreement (DTAA) with 82 countries. Justice Mahadevan wrote the leading judgement. Justice Pardiwala the concurring judgement.
The appeals arose from a 224-page long final judgment and common order dated August 28, 2024 delivered by the High Court's Division Bench of Justices Yashwant Varma and Purushaindra Kumar Kaurav in a writ of 2020. Supreme Court disposed of the appeal against the High Court's verdict by the common judgment. The judgement by High Court was authored by Justice Varma.
The respondents–assessees viz., Tiger Global International II Holdings, Tiger Global International III Holdings, and Tiger Global International IV Holdings, are private companies limited by shares, incorporated under the laws of Mauritius. They were set up with the primary objective of undertaking investment activities with the intention of earning long-term capital appreciation and investment income. The assessees are regulated by the Financial Services Commission in Mauritius and have been granted a Category I Global Business License4 under Section 72(6) of the Financial Services Act, 2007, enacted by the Parliament of Mauritius.
The business of the assessees, according to them, is wholly controlled and managed by their Board of Directors in Mauritius. The assessees claim to have satisfied all the requirements laid down by the FSC in Section 3 of Chapter 4 of the Guide to Global Business, thereby establishing commercial substance in Mauritius. The assessees had three Directors on the Board of Directors, of whom two are Mauritian residents and one is a resident of the United States. They have maintained, and continue to maintain, their principal bank account and accounting records in Mauritius. They have caused their statutory financial statements to be prepared and audited in Mauritius and continue to do so. They have held and continue to hold, office premises in Mauritius since incorporation and have two employees at the same. Further, the assessees hold valid Tax Residency Certificates issued by the Mauritius Revenue Authority, certifying them to be tax residents in Mauritius for the income tax purposes. On the basis of the same, they claim to be tax residents of Mauritius under the laws of Mauritius and under the DTAA between India and Mauritius for the avoidance of double taxation and the prevention of fiscal evasion.
The assessees engaged Tiger Global Management7, LLC, a company incorporated in the United States of America, to provide services in relation to their investment activities. All services provided by TGM, including but not limited to investment sourcing, portfolio stewardship, and observership services, are subject to review and final approval by the Board of Directors of the assessees. TGM does not have the right to contract on behalf of, or bind, the assesses, or take any decisions on their behalf without the approval of the Board of Directors. The assessees also hold valid Permanent Account Numbers issued by the Indian income tax authorities.. The assessees held shares of Flipkart Private Limited8, a private company limited by shares, incorporated under the laws of Singapore.
Thereafter, Singapore Co. invested in multiple companies in India, and the value of its shares was derived substantially from assets located in India. The assessees transferred shares of Singapore Co. ("Sale Shares") held by them to Fit Holdings S.A.R.L ("Buyer"), a company incorporated under the laws of Luxembourg. These transfers were undertaken as part of a broader transaction involving the majority acquisition of Singapore Co. by Walmart Inc., a company incorporated in the United States of America, from several shareholders, including the assessees. Thereafter, the assessees approached the Indian tax authorities by filing applications under Section 197 of the Income Tax Act, 19619, seeking certification of nil withholding prior to consummation of the transfer. By notices dated 17.08.2018, the tax authorities informed that the assessees would not be eligible to avail the benefits under the DTAA on the ground that they were not independent in their decision-making and that control over the decision- making relating to the purchase and sale of shares did not lie with them. The tax authorities, accordingly, issued certificates dated August 17, 2018.
In The Authority for Advance Rulings (Income Tax) & Ors. vs. Tiger Global International Iii Holdings (2026), Supreme Court’s Division Bench of Justices J.B. Pardiwala and R. Mahadevan delivered a j15-page long udgement dated January 15, 2026, wherein it concluded:”50. In our view, once it is factually found that the unlisted equity shares, on the sale of which the assessees derived capital gains, were transferred pursuant to an arrangement impermissible under law, the assessees are not entitled to claim exemption under Article 13(4) of the133 that the transactions in the instant case are impermissible tax-avoidance arrangements, and the evidence prima facie establishes that they do not qualify as lawful. Consequently, Chapter X-A becomes applicable. The applications preferred by the assessees relate to a transaction designed prima facie for tax avoidance and were rightly rejected as being hit by the threshold jurisdictional bar to maintainability, as enshrined in proviso (iii) to Section 245R(2). Accordingly, capital gains arising from the transfers effected after the cut-off date, i.e., 01.04.2017, are taxable in India under the Income Tax Act read with the applicable provisions of the DTAA. The judgment of the High Court therefore deserves to be set aside. 51. In the result, all the appeals are allowed and the impugned judgment of the High Court is set aside. There shall be no order as to costs.” 52. Pending application(s), if any, shall stand disposed of.”
The respondents – assessees viz., Tiger Global International II Holdings, Tiger Global International III Holdings, and Tiger Global International IV Holdings, are private companies limited by shares, incorporated under the laws of Mauritius. They were set up with the primary objective of undertaking investment activities with the intention of earning long-term capital appreciation and investment income. The assessees are regulated by the Financial Services Commission in Mauritius and have been granted a Category I Global Business License4 under Section 72(6) of the Financial Services Act, 2007, enacted by the Parliament of Mauritius.
The business of the assessees, according to them, is wholly controlled and managed by their Board of Directors in Mauritius. The assessees claim to have satisfied all the requirements laid down by the FSC in Section 3 of Chapter 4 of the Guide to Global Business, thereby establishing commercial substance in Mauritius. The assessees had three Directors on the Board of Directors, of whom two are Mauritian residents and one is a resident of the United States. They have maintained, and continue to maintain, their principal bank account and accounting records in Mauritius. They have caused their statutory financial statements to be prepared and audited in Mauritius and continue to do so. They have held and continue to hold, office premises in Mauritius since incorporation and have two employees at the same. Further, the assessees hold valid Tax Residency Certificates issued by the Mauritius Revenue Authority, certifying them to be tax residents in Mauritius for the income tax purposes. On the basis of the same, they claim to be tax residents of Mauritius under the laws of Mauritius and under the DTAA between India and Mauritius for the avoidance of double taxation and the prevention of fiscal evasion.
The assessees engaged Tiger Global Management7, LLC, a company incorporated in the United States of America, to provide services in relation to their investment activities. All services provided by TGM, including but not limited to investment sourcing, portfolio stewardship, and observership services, are subject to review and final approval by the Board of Directors of the assessees. TGM does not have the right to contract on behalf of, or bind, the assesses, or take any decisions on their behalf without the approval of the Board of Directors. The assessees also hold valid Permanent Account Numbers issued by the Indian income tax authorities.. The assessees held shares of Flipkart Private Limited8, a private company limited by shares, incorporated under the laws of Singapore.
Thereafter, Singapore Co. invested in multiple companies in India, and the value of its shares was derived substantially from assets located in India. The assessees transferred shares of Singapore Co. ("Sale Shares") held by them to Fit Holdings S.A.R.L ("Buyer"), a company incorporated under the laws of Luxembourg. These transfers were undertaken as part of a broader transaction involving the majority acquisition of Singapore Co. by Walmart Inc., a company incorporated in the United States of America, from several shareholders, including the assessees. Thereafter, the assessees approached the Indian tax authorities by filing applications under Section 197 of the Income Tax Act, 19619, seeking certification of nil withholding prior to consummation of the transfer. By notices dated 17.08.2018, the tax authorities informed that the assessees would not be eligible to avail the benefits under the DTAA on the ground that they were not independent in their decision-making and that control over the decision- making relating to the purchase and sale of shares did not lie with them. The tax authorities, accordingly, issued certificates dated August 17, 2018.
On the preliminary objections raised by the Revenue, the High Court had found that the Commissioner of Income Tax, after referring to a detailed examination conducted by the Department during the Section 197 certification process, had concluded that the question of chargeability of capital gains and the identification of the beneficial owner, upon piercing the corporate veil, had already been determined. In light of the same, and in the absence of any change in factual circumstances, the CIT had urged the Authority for Advance Rulings (AAR) to reject the applications made by the respondents. The High Court observed that the tone and tenor of the observations and findings of the AAR that the respondents were set up only for making investments in order to derive benefits under the DTAA, that the head and brain were not situated in Mauritius, that Mr. Charles P. Coleman exercised control over the respondents, etc., did not appear to be tentative or based on a preliminary or prima facie examination. Rather, they reflected a conclusive determination. It also noted that both the CIT and the AAR had reached definitive findings, the effect of which would constrain subordinate authorities from ignoring or bypassing such conclusions.
The High Court further found error in the AAR’s conclusion that TGM LLC was the holding or parent company of the respondents. It held that neither the CIT nor the AAR had succeeded in rebutting the consistent stance of the respondents that TGM LLC functioned merely as an investment manager and had no equity participation in the respondents. No evidence was presented to show that TGM LLC had contributed any funds or that monies were repatriated to TGM LLC from the respondents. The High Court further held that the respondents could not be dismissed as entities lacking economic substance. They were structured to operate as pooling vehicles for investments and held GBL-I under Mauritian law. Their investor base comprised more than 500 investors from over 30 jurisdictions, and their assets and liabilities reflected significant economic activity, with total liabilities and shareholders’ equity amounting to over USD 1.76 billion, and a net increase in shareholders’ equity from operations exceeding USD 267 million. The High Court also observed that the transfer of shareholding in question took place in 2018 as part of a broader global transaction involving Walmart Inc. The strategy of pooling investments through the respondents was found to be a prudent commercial decision, as it allowed efficient capital deployment rather than requiring each investor to act individually. The High Court concluded that the period of investment in the Flipkart Singapore holding entity exceeded a decade and when viewed in conjunction with the expenditure incurred in Mauritius, these factors collectively dispelled any notion that the respondents lacked economic substance.
On the question of control and decision-making, the High Court observed that while a parent or holding company may exercise supervisory functions over its subsidiaries, including by appointing directors or authorising key decisions, such influence does not render the subsidiary a mere puppet unless there is evidence of fraud, sham, or complete lack of independence. The mere presence of Directors connected with the TG Group, such as Mr. Charles P. Coleman and Mr. Steven Boyd, did not justify an inference of subservience or loss of independent agency. After taking note of the Board resolutions in detail, the High Court found that they reflected decisions taken collectively by the full Board. Though Mr. Coleman was authorised to approve expenditures exceeding USD 250 million, such authority was conferred by a collective decision of the Board and required countersignature by Group C Mauritian-based Directors. The key Directors, such as Mr. Moussa Taujoo, Mr. Mohammad Akshar Maherally, and Mr. Steven Boyd, were also signatories to the constitutional documents, akin to memoranda of association. The High Court further found that the minutes of Board meetings, when read holistically, evidenced deliberative and collective decision-making rather than unilateral action. The fiduciary role of the investment manager was also noted as a legitimate basis for certain Board placements. Thus, the High Court held that the respondents’ Boards could not be said to have been deprived of autonomy or reduced to subservient bodies.
On the issue of beneficial ownership, the High Court reiterated the principle of “substance over form,” holding that beneficial ownership presupposes a scenario where the ostensible recipient or holder of income has no control or discretion over such income and merely acts as a conduit or administrator for another. The High Court further held that in the present case, no evidence had been led by the Revenue to demonstrate that the respondents were contractually or legally obligated to pass on the gains from the share transfer to TGM LLC, or that they acted on its behalf. The argument that the respondents lacked beneficial ownership was therefore found to be baseless, resting solely on conjecture and not supported by material evidence.
The High Court, relying on the decisions of this Court in Union of India v. Azadi Bachao Andolan (2004) 10 SCC 1 and Vodafone reiterated 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. The High Court further found that Mauritius has long been recognised as a favourable investment destination and that “treaty shopping” per se is not impermissible unless it is clearly shown to be a device for tax evasion or contrary to the intent of the treaty. The issuance of a TRC by the Mauritian authorities was held to be sacrosanct and to establish a presumption of legitimate tax residency and beneficial ownership. The High Court held that such certification is to be respected by the Revenue, and any attempt to pierce the corporate veil must be grounded in compelling evidence of tax fraud, sham transactions, or complete absence of economic substance. It is only when the Revenue is able to meet such a threshold that it can disregard the presumption of validity that arises the moment a TRC is produced and the Limitation of Benefits conditions are fulfilled.
The High Court further noted that both Azadi Bachao Andolan and Vodafone were decided before a statutory framework on tax residency had been formally enacted. Circular No. 789 of 2000 had clarified that a TRC issued by Mauritius would suffice for determining both fiscal residence and beneficial ownership, including for capital gains. Noting that a subsequent attempt to dilute this position via the Finance Bill, 2013, by proposing that a TRC would not be sufficient to claim treaty benefits, was abandoned, and that a press release dated 01.03.2013 reaffirmed that tax authorities were not to go behind
the TRC, the High Court held that this reiterated the legal sufficiency of the TRC.
As far as the Limitation of Benefits15 clause introduced in the DTAA is concerned, the High Court held that such clauses are specifically designed to address treaty abuse and are determinative in such inquiries. Once LOB provisions are satisfied, the Revenue cannot erect additional barriers or invoke vague suspicions. Any challenge to treaty benefits in the face of a satisfied LOB clause must meet an extremely high threshold and be based on evidence of fraud, sham, or intent to defeat the Treaty. The High Court further held that the LOB clause had been inserted into the DTAA in the backdrop of the introduction of Chapter XA in the Indian Income Tax Act, and Article 27A of the DTAA expressly grandfathered all transactions relating to shares acquired prior to 01.04.2017. This demonstrated a clear intent by both Contracting States to align treaty protections with domestic legislation while preserving the benefit of grandfathering. The High Court also noted that in Azadi Bachao Andolan, it was held that once the DTAA was recognised as intended to override the provisions of the Act, it would be impermissible for national courts to lift the veil of incorporation.
With regard to Article 13(3A) of the DTAA, the High Court concluded that the said Article represented the intent of the Contracting States to ring-fence and exempt capital gains arising from the sale of shares acquired prior to 01.04.2017. Article 13(3B) introduced separate tax rates for gains arising from shares acquired after that date. The absence of a tax rate for pre-2017 transactions under Article 13(3B) strongly evidenced the intention to exclude such gains from tax, aligning with the Treaty’s overarching purpose. Domestic rules, such as Rule 10U under Chapter XA, could not override or dilute this treaty protection. In particular, the Revenue’s reliance on Rule 10U(2) to defeat grandfathering under Article 13(3A) was rejected. The High Court held that the phrase “without prejudice” in Rule 10U(2) signified that it would apply only in scenarios not already addressed by Rule 10U(1)(d), and thus could not be used to nullify the grandfathering clause.
Lastly, the High Court found the AAR’s interpretation of Article 13(3A) to be legally unsound and held that the AAR had erroneously concluded that the sale of shares in a Singapore company would not fall under Article 13(3A), on the premise that it applied only to shares of Indian companies. The High Court rejected this view, noting that the shares sold derived substantial value from underlying Indian assets, thereby satisfying the test for indirect transfers. Accepting the AAR’s view would nullify the treaty protections and defeat the purpose of the grandfathering clause, especially since the acquisition occurred prior to the critical date. The High Court thus concluded that the respondents’ transactions were grandfathered under the DTAA, and the Revenue could not circumvent these provisions through domestic law or administrative reinterpretation. In effect, the High Court held that the transaction was not designed for avoidance of tax and stood grandfathered by virtue of Article 13(3A) of the DTAA. Accordingly, the High Court allowed the Writ Petitions filed by the respondents and quashed the AAR’s Order.
The High Court also found that investments emanating from Mauritius are not a recent phenomenon. The first DTAA was signed at Port Louis on 24.08.1982 and came into effect from 01.04.1983 and 01.07.1983 in the two countries, respectively. The last Protocol for amending the provisions of that treaty was signed on 10.05.2016, as could be seen from the data available on the portal of the Department for Promotion of Industry and Internal Trade, which captures foreign direct investment into the country between April 2000 and March 2024. The High Court further found that Circular No. 682 constituted the first significant clarification rendered by the Board in the context of Article 13 of the DTAA and the taxation of capital gains. Paragraph 3 of Circular No. 682 unequivocally declared that gains derived by a resident of Mauritius from the sale or transfer of shares would be taxable only in that country. Circular No. 682 further proclaimed that even if a resident of Mauritius were to derive income from the alienation of shares of Indian companies, such income would be liable to capital gains tax only in Mauritius, in accordance with the tax laws prevalent in that country. Therefore, it was held that such an entity would not face a capital gains tax liability arising or accruing in India.
The High Court also considered that the above Circular was followed by Circular No. 789 which clarified the position of the Revenue with respect to TRCs issued by authorities in Mauritius, such certificates constituting sufficient evidence for the purposes of ascertaining the status of residence as well as the application of principles of beneficial ownership. Circular No. 789 clarified that the test of residence flowing from a TRC would also apply in respect of income from capital gains on the sale of shares. Circular No. 789 reiterated the stand taken in Circular No. 682, holding that a resident of Mauritius would not be subjected to capital gains tax arising in India consequent to the sale of shares under Article 13(4) of the DTAA. Of equal significance were certain proposed amendments to the Act.
After hearing the parties and placing reliance on the judgment in Vodafone, the High Court had held that the order of the AAR dated March 26, 2020 suffered from manifest and patent illegalities. The view taken therein with respect to the transaction in question was found to be wholly untenable and unsustainable. Consequently, its conclusion that the impugned transaction was designed for tax avoidance was held to be arbitrary and incapable of being sustained. In the opinion of the High Court, the transaction stood duly grandfathered by virtue of Article 13(3A) of the DTAA. Accordingly, the High Court allowed the writ petitions, quashed the AAR’s order dated March 26, 2020, and affirmed the assessees’ contention that the transaction was not designed for avoidance of tax, thereby entitling them to all consequential reliefs.
Supreme Court has set aside Justice Varma's judgement and disabled the treaty shopping for tax evasion by companies setting up shell companies.
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