Tiger Global liable to pay tax on Flipkart deal

rethink returns.

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The judgment records that the three Mauritius entities of the firm received sale proceeds of about $2.08 billion.

(PTI)

Tax litigation around tax treaty claims may increase and impact the tax insurance market.“But the big takeaways are dilution of tax residency certificate, use of general anti-avoidance rule (GAAR), and a key landmark in the evolution of India’s tax treaty jurisprudence,” she added.

In 2016, India amended the India-Mauritius tax treaty to curb tax avoidance, stating shares bought on or after 1 April 2017 would be taxed in India. Investments made before this date continued to enjoy tax exemption, subject to certain conditions. The key issue in the Flipkart case, therefore, was whether Tiger Global could claim tax exemption under the treaty, or whether its Mauritius-based entities were merely “front” companies controlled from the US.

The Supreme Court said the focus must be on the substance of the transaction, rather than merely the location where the company is registered. It said that after the tax treaty changes, having a tax residency certificate alone is not enough. Even if an investment was made before the cutoff date, that protection will not apply if the structure was mainly used to get a tax benefit.