The Supreme Court’s verdict in the Tiger Global case marks an important shift in India’s tax and investment jurisprudence. By siding with the tax department and denying treaty benefits to Tiger Global’s Mauritius-based entities on capital gains from the 2018 sale of unlisted Flipkart shares, the court has decisively reinforced a substance-over-form approach to cross-border investments.
The ruling makes it clear that possession of a tax residency certificate and compliance with limitation-of-benefits provisions, though necessary, do not by themselves guarantee protection under a tax treaty. Tax authorities, the court held, are entitled to examine whether an offshore structure has genuine commercial substance or is merely a conduit designed to avoid tax. This substantially widens the scope for scrutiny of fund structures that have long been used by foreign investors routing capital into India.
The judgement also narrows the effective reach of the grandfathering provisions under the India-Mauritius tax treaty. While the exemption on capital gains for shares acquired before April 1, 2017, remains on paper, the court has clarified that such protection is conditional rather than automatic. Even legacy investments can be denied treaty benefits if the underlying structure lacks economic substance. For foreign investors, this introduces fresh uncertainty over the treatment of transactions previously assumed to be insulated from dispute.
From the revenue department’s standpoint, the verdict validates its long-standing view on treaty abuse. For the government, however, the implications are more complex. Tax certainty has been a central plank of India’s effort to attract global capital. A ruling that permits deeper post-facto scrutiny risks unsettling that narrative, particularly if it encourages the reopening of past transactions. It also revives concerns over aggressive tax enforcement—concerns the government sought to allay through the 2021 settlements of the Vodafone and Cairn cases.
The decision represents a departure from the Supreme Court’s earlier position in the Azadi Bachao Andolan case, which had accorded decisive weight to Mauritius residency certificates. Along with more recent rulings on treaty interpretation, including on the most-favoured nation clause, it signals a judicial trend towards tighter oversight of tax treaties, with potential diplomatic and commercial fallout.
India’s tax authorities are entitled to curb abuse and artificial structures. The challenge now is to ensure that legitimate investors are not drawn into prolonged uncertainty. The Tiger Global judgement strengthens enforcement; whether it undermines confidence will depend on how carefully the government calibrates its response.