The Tiger Global ruling: A blow to foreign investment in India?

The Supreme Court's ruling creates tax uncertainty that may hit the confidence of foreign investors

- KETAN DALAL

The Supreme Court judgement in the case of Tiger Global's tax liability has, contrary to expectations, gone against the assessee and in favour of India's revenue authorities.

In 2009, the private equity firm had invested in the Singapore-based holding company of e-commerce major Flipkart, and then increased its exposure over the next two years to about $1 billion—a 20% stake. In 2017, it sold part of its holding to SoftBank Group, and in 2018, it sold most of its shares to Walmart. This sale triggered the tax dispute.

The holding structure was complex. It was Tiger Global Mauritius (TGM) that held equity in Flipkart Singapore, which in turn had a stake in Flipkart India, and what was sold to Walmart in 2018 was TGM's stake in Flipkart Singapore. As such, this was not a sale of a company in India. This offers a parallel with the Vodafone case: in 2007, Hong Kong-based Hutchison Group had sold its stake in overseas holding firms (including one in Mauritius) that controlled Hutchison Essar in India to UK-based Vodafone. In TGM's case, though, the sale was by a Mauritius company of shares in a Singapore firm.