Tiger Global’s Flipkart stake

TAX EXPERTS SAID while the ruling maybe technically sound and rightly affirmed India’s legitimate tax sovereignty, it could send wrong signals to foreign investors at a time India is facing large scale net outflow of foreign portfolio investments.

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In its ruling, the SC bench underscored the “doctrine of substance over form,’ which had been well recognized in previous court rulings including McDowell and the landmark indirect share transfer case which involved Vodafone. The “form” in the instant case pertains to tax residency certificates (TRC) issued by Mauritius authorities.

Tax experts have expressed concern over the way the SC interpreted the grandfathering provisions, by stating that the provision of the cutoff date of investments (April 1, 2017) under Rule 10 U(1) (d) stood diluted by Rule 10U (2). This means that the anti-abuse provisions (GAAR) shall apply to any arrangement, irrespective of the date on which it was entered into. The duration of the arrangements is irrelevant, the court held.