Supreme Court Rule Impacts Tiger Global's Tax Claims on Flipkart Exit

The Supreme Court ruled capital gains from Tiger Global's 2018 exit from Flipkart taxable in India, overturning a prior Delhi High Court decision. The verdict has significant implications for M&A deals claiming tax treaty benefits, stressing the importance of understanding company structures and tax residency certificates.

The Supreme Court has upheld the decision of the Indian revenue authorities, making capital gains from Tiger Global's exit from Flipkart in 2018 taxable in India. This decision overturns the Delhi High Court's judgment from August 2024, which had favored Tiger Global.

The bench comprised of Justices J B Pardiwala and R Mahadevan argued that the transfer of unlisted equity shares was part of an impermissible arrangement, denying exemption claims under the DTAA. The ruling is expected to impact current and past mergers and acquisitions where similar tax treaty benefits were claimed.

Legal experts emphasized that private equity and Foreign Portfolio Investors must reassess their investment structures. The decision may lead to increased tax litigation and affect the tax insurance market. The verdict also highlights the dilution of tax residency certificates and underscores the significance of GAAR in India's evolving tax treaty jurisprudence.