Supreme Court Upholds Tax Levy on Tiger Global's Flipkart Exit Gains

The Supreme Court of India ruled in favor of imposing a tax on capital gains made by Tiger Global after its 2018 exit from Flipkart. The ruling reversed a previous Delhi High Court decision, emphasizing the need to prevent treaty abuse and safeguard public revenue.

The Supreme Court of India has delivered a landmark ruling, allowing for the taxation of capital gains generated by Tiger Global's exit from Flipkart in 2018. The e-commerce giant Flipkart was acquired by Walmart in a major transaction valued at approximately USD 16 billion, and the exit by Tiger Global resulted in significant financial gains.

Central to the case was the debate over capital gains tax as Tiger Global argued against tax liability in India, claiming protection under the India-Mauritius tax treaty. They posited that the entities involved were eligible for treaty benefits due to valid Tax Residency Certificates from Mauritius, which reportedly ensured nil tax liability on the gains.

However, the Supreme Court overturned the 2024 Delhi High Court judgment, siding with the Income Tax department. The court declared that possession of a Tax Residency Certificate does not preclude investigation into potential tax avoidance. Consequently, the court maintained that the India-Mauritius amendments aimed to combat treaty misuse were legitimate and applicable.

(With inputs from agencies.)