In a landmark ruling with far-reaching implications for foreign investors, the Supreme Court has held that capital gains arising from Tiger Global’s $1.6 billion sale of its stake in Flipkart to Walmart are taxable in India. The verdict marks a significant victory for Indian tax authorities and brings closure to a long-running dispute over the use of international tax treaties.

TAX TREATY BENEFIT DENIED

The apex court ruled that Tiger Global is not entitled to claim tax exemption under the India–Mauritius Double Taxation Avoidance Agreement (DTAA). Upholding the Income Tax Department’s position, the court found that the transaction structure was designed primarily to avoid tax liability in India.

The bench observed that the share sale arrangement between Tiger Global and Walmart amounted to a tax-avoidance scheme and therefore could not enjoy treaty protection.

CAPITAL GAINS TAXABLE IN INDIA

The Supreme Court unequivocally stated that capital gains arising from the 2018 transaction are taxable in India. It emphasised that the right to tax income generated within a country’s jurisdiction is an inherent aspect of national sovereignty.

By rejecting Tiger Global’s argument that the gains should be taxed outside India, the court confirmed the fund’s tax liability on profits from the Flipkart stake sale.

MAJOR BOOST FOR TAX AUTHORITIES

The ruling is widely seen as a major boost for India’s revenue department. It reinforces the government’s stance on taxing cross-border transactions where the underlying economic activity and value creation occur in India.

Tax officials have long maintained that treaty benefits should not be misused to sidestep legitimate tax obligations, particularly in high-value deals involving Indian companies. Legal experts say the judgment sets an important precedent and could influence how foreign investors structure future investments and exits from Indian assets.

The verdict was delivered by a bench comprising Justices J.B. Pardiwala and R. Mahadevan. A detailed order is awaited.