Supreme Court Revokes Tax Exemption for Tiger Global

The Supreme Court annulled the Delhi High Court's judgment granting capital gains tax exemption to Tiger Global's Mauritius entities, ruling the transactions as tax avoidance. It held these transfers made to influence treaty benefits under India's tax laws and reiterated GAAR applicability for such tax strategies, impacting future cross-border investments.

On Thursday, the Supreme Court overturned a 2024 decision by the Delhi High Court that had granted capital gains tax exemption to Tiger Global's Mauritius-based entities. The ruling recognized the transactions as impermissible tax avoidance schemes, stating they fall under taxable events in India.

A Bench of Justices R Mahadevan and J B Pardiwala concluded that the Revenue authorities effectively demonstrated that the share transfers by Tiger Global's Mauritius entities lacked commercial substance and primarily sought treaty benefits via the India-Mauritius Double Taxation Avoidance Agreement (DTAA).

The Court clarified that the General Anti-Avoidance Rule (GAAR) applied under Chapter X-A of the Income Tax Act and validated the Authority for Advance Rulings' (AAR) rejection of the applications. This impact extends to tax strategies, including M&A deals, urging private equity and FPIs to reconsider their investments. Experts suggest this decision as a crucial juncture in India's tax treaty jurisprudence.

(With inputs from agencies.)