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The ruling echoes a familiar global approach, placing greater weight on commercial substance and decision-making reality than on documentation alone, while reaffirming India’s sovereign right and duty to its citizens to protect its tax base, clarifying that foreign residence determinations do not bar factual review in India, and that treaties are meant to avoid double taxation, not double non-taxation.
The dispute arose from Tiger Global’s 2018 exit from Flipkart, structured through Mauritian entities holding shares of a Singapore company whose value was derived substantially from Indian operations, thereby triggering the indirect transfer provisions. Under indirect transfer rules, a transaction executed offshore may still be taxed in India if the underlying economic value is sourced from India. These provisions were introduced into Indian domestic law in 2012, in the wake of the Vodafone controversy.
The taxpayers stated that the Mauritian entities were set up for investment purposes; however, this assertion was tested in light of the record showing that Flipkart was the sole investment held through those entities. Further, while the transferor entities held valid Tax Residency Certificates (TRCs), the Court upheld the Indian tax authority’s right to examine whether those entities had genuine commercial substance in their claimed jurisdiction of residence. In setting aside the 2024 Delhi High Court decision, the Court reaffirmed that a TRC is a relevant consideration, while leaving scope for factual review in suitable circumstances.
Given the longstanding role of TRCs and treaty protection in inbound investment structures, the judgment highlights the importance of considering such documentation alongside the underlying commercial reality, including decision‑making, control and business activity in the relevant jurisdiction. The ruling also addresses expectations around grandfathering of earlier investments. Investors’ belief in pre‑2017 protection flowed from the Mauritius Protocol’s grandfathering of earlier acquisitions and GAAR’s Rule 10U(1)(d) carve‑out for transfers of investments made before 1 April 2017, reinforced by long‑standing TRC practices.
The Court recognised this context but indicated that Rule 10U(2) may still apply to post‑2017 arrangements, and that investment‑level grandfathering does not necessarily preclude review of a later, substance‑light arrangement.
Both statutory and judicial anti‑avoidance principles were central to the Court’s analysis. It noted that while GAAR allows review of arrangements lacking commercial substance, long‑established judicial anti‑avoidance principles continue to operate alongside it, enabling scrutiny of substance where appropriate.
For the investor community, particularly private equity funds, venture capital investors, foreign portfolio investors and family offices, the judgment points to greater emphasis on governance, control and documentation. Boards and investment committees may increasingly examine where strategic control and risk oversight sit, as opposed to merely where routine execution is carried out. Practical indicators such as decision‑approval rights, banking mandates and operating independence can therefore be relevant in assessing whether governance and substance align with the stated structure.
The implications are also relevant for multinational businesses engaged in cross-border trade. Regional headquarters, procurement hubs, distribution models and digital structures that rely on offshore entities may find greater emphasis placed on where value is created and decisions are taken. Compliance efforts will likely extend beyond establishing treaty eligibility to maintaining consistent evidence of people, functions and risks aligned with profit attribution.
Justice J.B. Pardiwala, in his concurring opinion with the main judgment authored by Justice R. Mahadevan, explained that the objective is to protect India’s right to tax income linked to its economy while continuing to welcome genuine foreign investment. He emphasised the need to strike a careful balance, safeguarding the tax base without undermining stability for long‑term investors, and noted that clear guidance and consistent application of anti‑avoidance rules will be important in sustaining investor confidence.
For investors and businesses alike, the practical response lies in preparation rather than concern. Periodic reviews of structures, strengthened contemporaneous documentation of commercial purpose, and early consideration of tax implications at the exit or restructuring stage can help manage risk. Where facts evolve, aligning governance and decision-making frameworks to reflect those changes may reduce uncertainty.
The Tiger Global ruling serves as a reminder that certainty today is achieved not through form alone, but through alignment between structure and substance. For those willing to adapt their governance and operating models accordingly, India’s investment story continues to offer opportunity within a transparent and rules-based framework.
This article first appeared in the Moneycontrol on 19 January 2026.
