Apex Court: Tax Times | Photo credit: Akhilesh
In short, they said that no “India connection” could be established for the purpose of taxation – the crux of the Vodafone case. They approached the AAR, which disagreed with their position. They approached the Delhi High Court, which agreed with their position that the profits are exempt under the DTAA. The amount of tax involved is reportedly around ₹14,500 crore. The Tax Authorities opted to appeal to the Supreme Court.
Position of the Tax Authorities
In the Supreme Court, the tax authorities argued that a DTAA merely confers taxing rights and does not amount to a surrender of taxing power, nor does a Tax Residency Certificate (TRC) deprive India of its right to investigate misuse or lack of commercial content. The transaction is an indirect transfer as Flipkart Singapore derives significant value from Indian assets.
This first triggers taxability under domestic law, and only then can the DTAA exemption be tested. They also said that a TRC is only prima facie evidence of residence. Concepts such as substance over form, control and management, and locus of effective management (POEM) can still be explored. The factual pattern of the transaction indicates an impermissible avoidance arrangement, justifying the denial of treaty benefits.
Global tiger response
Tiger Global responded that under Article 4 of the India-Mauritius Agreement, only Mauritius can determine who is liable to pay tax under its law; India cannot redefine the domicile of Mauritius by reinterpreting the Mauritian statutes. Once the TRC and necessary forms have been submitted, residence and beneficial ownership must be accepted, unless there is dual residence.
CBDT circulars and press releases state that a Mauritian TRC is sufficient evidence of residency and beneficial ownership for treaty purposes, including capital gains. Domestic doctrines such as substance over form or lifting the corporate veil cannot be used to dilute treaty protection unless express treaty language is used.
Supreme Court ruling
The Supreme Court upheld the tax authorities’ position that taxability arises in India. It ruled that merely possessing a TRC does not preclude investigations into effective control and management, commercial content and abuse.
On the facts, the Court found clear prima facie evidence that the Mauritius entities were part of an arrangement designed primarily to obtain treaty exemption while avoiding tax, both in India and Mauritius, with actual control vested in the US group.
Consequently, the Court ruled that the transaction constituted an impermissible tax avoidance scheme. The Supreme Court set aside the judgment of the Delhi High Court, allowed the tax authorities’ appeals and held that capital gains arising from the transfers made after April 1, 2017 are taxable in India under the Income-tax Act read with the applicable DTAA provisions, without any treaty exemption being available on the facts.
The ruling is expected to prompt funds and foreign investors using Mauritius or similar jurisdictions to reassess holding and exit structures for India-focused investments. It confirms that India can tax offshore exit activities whose value is substantially derived from Indian assets. For ongoing and future deals, investors face higher tax risk on indirect transfers and must build robust commercial content, documentation and GAAR-focused due diligence into structures and exits.
When the Supreme Court ruled in favor of Vodafone in March 2012, the government amended Article 9(1)(i) in May 2012 with retrospective effect from April 1962. We have Budget 2026 ahead of us and a new Income Tax Act is due to be introduced soon. While the Tiger Global decision is in favor of the government, it remains to be seen if some changes are in store.
The writer is a chartered accountant
Published on January 17, 2026
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