THE AUTHORITY FOR ADVANCE RULINGS (INCOME TAX) v. TIGER GLOBAL INTERNATIONAL II HOLDINGS
Supreme Court: GAAR and Treaty Benefits - Taxability of Capital Gains Arising from Indirect Transfer of Shares by Mauritian Entities.
Court: Supreme Court of India
Citation: 2026 INSC 60
Decision Date: 15-01-2026
List of Laws
The Income Tax Act, 1961; Double Taxation Avoidance Agreement (DTAA) between India and Mauritius; General Anti-Avoidance Rule (GAAR); Limitation of Benefits (LOB) Clause; Finance Act, 2012; Finance Act, 2013; The Constitution of India; CBDT Circular No. 789; Mauritius Income Tax Act
- Facts: Tiger Global International entities, incorporated in Mauritius, sold shares of Flipkart (a Singapore-based company with substantial Indian assets) to Fit Holdings (Luxembourg). The Indian tax authorities sought to tax the capital gains arising from this transaction, arguing it was designed for tax avoidance, while the assessees claimed treaty benefits under the India-Mauritius Double Taxation Avoidance Agreement (DTAA). The Authority for Advance Rulings (AAR) ruled against the assessees, deeming the transaction prima facie designed for tax avoidance.
- Procedural Posture: The assessees challenged the AAR's order before the Delhi High Court, which allowed their writ petitions and quashed the AAR's order, holding that the assessees were entitled to treaty benefits and their income was not chargeable to tax in India. The Revenue then appealed to the Supreme Court.
- Issue: Whether the capital gains arising from the sale of shares of a Singapore company (Flipkart), which holds shares of an Indian company, by a Mauritian company (Tiger Global) controlled by an American company, is prima facie an arrangement for tax avoidance, and whether it can be enquired into to ascertain whether the capital gains would be taxable in India under the Income Tax Act read with the relevant provisions of the Mauritius Treaty.
- Holding: The Supreme Court allowed the appeals, setting aside the High Court's judgment. It held that the transactions were impermissible tax-avoidance arrangements and the assessees were not entitled to claim exemption under Article 13(4) of the DTAA. Capital gains arising from transfers after 01.04.2017 are taxable in India under the Income Tax Act read with the applicable provisions of the DTAA.
- Reasoning: The Court reasoned that the AAR was justified in rejecting the applications as the transaction was prima facie designed for tax avoidance. The Court emphasized that the amendments to the Income Tax Act and the DTAA, particularly the introduction of GAAR (General Anti-Avoidance Rule) and the Limitation of Benefits (LOB) clause, empower tax authorities to scrutinize such transactions. The Court found that the assessees had failed to rebut the presumption of tax avoidance, and the Revenue was entitled to enquire into the transaction to determine whether the claim for exemption was lawful. The Court also noted that the effective control and management of the entities were not in Mauritius, further supporting the tax avoidance argument.
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