After securing a favourable judgment in the Tiger Global capital gains tax case, the tax department has said that not all tax disputes should be characterised as overreach or “tax terrorism”. Pending tax demands or withheld refunds in such cases should not automatically be viewed as arbitrary or coercive, officials said.
Sources in the Central Board of Direct Taxes (CBDT) said many disputes arise from genuine differences in interpretation, particularly in evolving areas of tax law. “Final certainty emerges only when the highest court settles the issue. Until then, both the taxpayer and the tax administration are bound by due process,” a senior CBDT official said.
According to officials, the department will now revive assessment proceedings for the assessment year 2019–20 in the Tiger Global matter. “The assessing officer will proceed to complete the assessments in line with the Supreme Court’s ruling. The refund claim of around ₹967.52 crore, which was withheld under Section 241A, will now be addressed as part of the assessment and consequential demand proceedings,” the sources said.
On Thursday, the Supreme Court denied tax treaty benefits to Mauritius-based entities of Tiger Global on capital gains arising from the sale of unlisted Flipkart shares in 2018.
Allowing the Revenue’s appeal, the apex court set aside a Delhi High Court judgment that had held the transactions to be protected under the grandfathering provisions of the India–Mauritius Double Taxation Avoidance Agreement (DTAA). The High Court had ruled that possession of a Tax Residency Certificate (TRC) and compliance with Limitation-of-Benefits (LOB) conditions were sufficient to claim treaty protection in the absence of fraud or sham transactions.
Revenue department sources said the Supreme Court’s judgment reiterates the importance of a state’s right to protect its tax base. “The ruling recognises the centrality of economic and fiscal sovereignty of a modern nation and the legitimate interest of the State in safeguarding public revenue,” they said.
Officials added that in high-value transactions, large tax demands are inevitable. “The figures reflect the scale of the underlying transaction. They should not, by themselves, be viewed as excessive or coercive,” the sources said.