The Tiger Global ruling, explained for foreign holding companies
What the Court decided, and what it means for your treaty structure
A $1.6 billion exit, routed through Mauritius
A TRC is not the final word
Tax officers can look behind the certificate and ask whether the company is real or a conduit.
Substance decides the case
- Who really decides? The authorities found control and decisions sat in the USA, not Mauritius
- Commercial reason: a holding company that exists only to claim a treaty can be ignored
- No escape route: even outside GAAR, courts can deny relief under judicial anti-avoidance principles
Grandfathering, narrowed then partly restored
Make the holding company real
- Board meetings and key decisions held where the company is resident
- Qualified local directors who actually decide, not just sign
- Real presence: office, staff, bank accounts and running costs
- A business reason for the structure, written down, beyond tax
Five checks for your structure
Delhi Legal Company
On 15 January 2026, the Supreme Court of India ruled against three Mauritius entities of the Tiger Global group on the capital gains from their 2018 sale of Flipkart Singapore shares to Walmart's buyer entity. The Court held that a Tax Residency Certificate (TRC) is necessary but not conclusive; that the India–Mauritius treaty's grandfathering protects direct transfers of Indian shares, not indirect transfers; that GAAR and judicial anti-avoidance principles can deny treaty benefits to conduit structures; and that the old CBDT circular treating TRCs as conclusive no longer shields abusive arrangements. In March 2026, the CBDT amended the GAAR rules to confirm that GAAR does not apply to income from transferring investments made before 1 April 2017, but the judgment's substance test and its reading of the treaty remain. Every foreign group that holds Indian companies through an intermediate holding company should now review its substance, documentation and exit plans.
1Why this case matters to every foreign holding company
For more than two decades, a large share of foreign investment into India was routed through holding companies in treaty jurisdictions such as Mauritius, Singapore, the Netherlands and Cyprus. The logic was simple: India's tax treaties with these countries historically allowed capital gains on the sale of Indian shares to be taxed only in the investor's country of residence, which often did not tax them at all. A TRC from that country was widely treated as enough to claim the benefit, following a CBDT circular of 2000 and the Supreme Court's 2003 decision in Azadi Bachao Andolan.
The Tiger Global judgment changes that starting point. It confirms that Indian tax authorities, and Indian courts, can look past the TRC to ask where the holding company is really controlled, whether it has genuine commercial substance and whether the structure was put in place mainly to obtain a treaty benefit. It also narrows the "grandfathering" protection that many investors thought covered all pre-2017 investments.
The judgment is not limited to private equity funds. It affects any foreign group that owns an Indian company through an intermediate entity: a Japanese manufacturer holding its Indian subsidiary through a Singapore regional hub, a European group using a Dutch holding company, a US technology company with a Mauritius or Cyprus vehicle, or a family office with an offshore holding company. Each of these structures will be examined more closely on exit, on dividends and in day-to-day treaty claims.
Who this guide is for: foreign parent companies, regional holding companies, private equity and venture funds, family offices and their Indian subsidiaries and advisers.
2The facts: from Mauritius to Flipkart to Walmart
The Mauritius entities
Three companies, Tiger Global International II, III and IV Holdings, were incorporated in Mauritius in 2011. They held Category 1 Global Business Licences, were regulated by the Mauritius Financial Services Commission, had local bank accounts and offices, and held Mauritius TRCs. They were ultimately owned by Cayman Islands funds.
The manager
Investment management was provided by Tiger Global Management LLC in the United States. The boards included two Mauritius-resident directors and one US-resident director, but bank account authority above specified limits rested with a US-based individual.
The investment
Between 2011 and 2015, the Mauritius entities acquired shares of Flipkart Private Limited, a Singapore company whose value was derived substantially from its Indian operating businesses.
The exit
In 2018, as part of Walmart's acquisition of a majority stake in Flipkart, the Mauritius entities sold their Flipkart Singapore shares to a Luxembourg buyer entity for about US$1.6 billion.
Because the sale was of shares in a Singapore company, not an Indian company, the transaction was an indirect transfer of Indian assets. Under India's indirect transfer rules, gains from such a sale can be taxed in India if the foreign company derives its value substantially from assets in India. The Mauritius entities applied for a certificate allowing the buyer to make the payment without withholding tax, relying on the India–Mauritius treaty. The tax department instead required withholding, and about ₹967 crore was deducted.
3The case's journey: AAR, Delhi High Court, Supreme Court
- 2018
Flipkart exit; tax withheld after the request for a nil withholding certificate is refused. - March 2020
The Authority for Advance Rulings (AAR) refuses to admit the applications, finding that the arrangement was prima facie designed to avoid tax. Under the advance ruling provisions, the AAR cannot admit an application relating to a transaction that is prima facie for tax avoidance. It found that control effectively lay with the US manager and that the Mauritius entities were conduits. - August 2024
The Delhi High Court sets aside the AAR's decision. It holds that a valid TRC is sufficient evidence of residence in the absence of fraud or sham, that the investments were grandfathered under the treaty, and that the exit was a genuine commercial transaction. - 15 Jan 2026
The Supreme Court allows the tax department's appeal, sets aside the High Court's judgment and restores the AAR's decision. - Feb – Apr 2026
Tribunals begin applying the ruling; the CBDT amends the GAAR rules; the tax department moves to resume the reassessment for the relevant year.
4What the Supreme Court held
The judgment covers several separate questions. Its main conclusions, as reported by leading commentators, are summarised below.
| Issue | Supreme Court's position |
|---|---|
| Value of a TRC | A TRC is a necessary condition for treaty benefits but is not conclusive. Authorities may examine where effective control and management lie, the commercial rationale and whether the entity performs real economic functions. |
| CBDT Circular 789 of 2000 | The circular, which treated TRCs as sufficient evidence of residence and beneficial ownership, cannot protect arrangements that are abusive or caught by anti-avoidance rules. Earlier precedents such as Azadi Bachao Andolan and Vodafone must be read in light of later statutory changes, including GAAR. |
| Treaty grandfathering | The grandfathering in Article 13(3A) of the India–Mauritius treaty covers gains from shares of companies resident in India. It does not extend to indirect transfers, such as shares of a Singapore company deriving value from India. |
| Indirect transfers | Gains from indirect transfers fall under the residuary article, and treaty relief can be denied where the structure is a conduit or lacks substance. |
| GAAR and pre-2017 investments | GAAR applies to arrangements that yield a tax benefit on or after 1 April 2017. Grandfathering of pre-2017 investments protects genuine investments, not arrangements lacking substance. |
| Judicial anti-avoidance (JAAR) | "Substance over form" principles developed by courts continue to apply alongside GAAR, and can deny treaty benefits to sham or conduit structures even where GAAR is not formally invoked. |
| Advance rulings | The AAR was right to refuse the applications because the transaction was prima facie designed for tax avoidance. |
“A Tax Residency Certificate is where the analysis begins, not where it ends.”
The Court also emphasised that taxation is an inherent attribute of sovereignty, and that treaties should not be used to create double non-taxation through structures without real economic presence in the treaty country.
5The treaty mechanics: Article 13 explained
To understand the significance of the judgment, it helps to see how the capital gains article of the India–Mauritius treaty changed in 2016. India amended its treaties with Mauritius, Singapore and Cyprus at around the same time, moving from residence-based to source-based taxation of gains on Indian shares.
| Provision | What it covers | Effect |
|---|---|---|
| Article 13(3A) | Shares of a company resident in India acquired on or after 1 April 2017 | India can tax the gains (source taxation) |
| Grandfathering | Shares of an Indian company acquired before 1 April 2017 | Gains remain taxable only in Mauritius |
| Article 13(3B) and LOB | Gains between April 2017 and March 2019 | Transitional 50% of the Indian rate, subject to a limitation of benefits clause |
| Article 13(4) | Gains from other property, the residuary clause | Taxable only in the state of residence, subject to anti-avoidance |
The Mauritius entities argued that their gains were either grandfathered or covered by the residuary clause. The Court held that grandfathering applies only to shares of Indian companies, and that even under the residuary clause, benefits could be denied because the structure was a conduit lacking substance. It also noted the requirement to show that the gains were genuinely subject to tax in the state of residence.
Not only Mauritius. The India–Singapore treaty contains similar grandfathering and limitation of benefits provisions, and many of India's other treaties now include a principal purpose test through the Multilateral Instrument. The reasoning in Tiger Global will be applied to holding structures in many jurisdictions, not just Mauritius.
6Indirect transfers: when foreign share sales are taxed in India
Since 2012, Indian law has provided that shares of a foreign company are deemed to be situated in India if they derive their value substantially from assets located in India. Gains on their sale can therefore be taxed in India even though the transaction happens entirely outside India.
6.1 When the rule applies
- Indian assets are treated as "substantial" if their value exceeds ₹10 crore and represents at least 50% of the value of all assets of the foreign company or entity.
- Small shareholders are excluded if, with associated enterprises, they hold 5% or less of the foreign company's voting power or capital and have no right of management or control.
- Where only part of the value derives from India, gains are taxed proportionately.
- Certain intra-group reorganisations and investments by specified regulated funds are exempt or relieved, subject to conditions.
- The Indian company may have reporting obligations when an indirect transfer occurs.
6.2 Why Tiger Global makes this more important
Before the judgment, many investors assumed that an indirect transfer by a treaty-resident holding company would be protected by the treaty's residuary clause. The Court's conclusion that indirect transfers are not covered by the grandfathering, combined with the willingness to deny residuary protection to conduits, means that sales of foreign holding companies with Indian subsidiaries now carry real Indian tax risk. Group restructurings, sales of regional holding companies and global M&A involving an Indian business all need an Indian tax analysis.
7GAAR, JAAR and the March 2026 CBDT amendment
7.1 GAAR in brief
India's General Anti-Avoidance Rules have applied since 1 April 2017. An arrangement can be declared an "impermissible avoidance arrangement" if its main purpose is to obtain a tax benefit and it meets at least one of four tests: it creates rights or obligations not normally created between independent parties, results in misuse or abuse of the tax law, lacks commercial substance, or is carried out in a manner not normally used for bona fide purposes. GAAR overrides treaty benefits, applies where the tax benefit in a year exceeds ₹3 crore, and can result in entities being disregarded and income being recharacterised.
7.2 The grandfathering controversy
When GAAR was introduced, the rules provided that it would not apply to income from the transfer of investments made before 1 April 2017. The Supreme Court's reasoning in Tiger Global was widely read as narrowing that protection, by focusing on whether the arrangement yielded a tax benefit after 2017. This caused alarm among funds with pre-2017 holdings.
7.3 The CBDT's response
On 31 March 2026, the CBDT issued two notifications, as reported by commentators:
- Notification No. 54/2026 amended the GAAR rules under the Income-tax Rules, 1962 to state that GAAR does not apply to income from the transfer of investments made before 1 April 2017, irrespective of when the transfer takes place; and
- Notification No. 55/2026 made the same provision in the Income-tax Rules, 2026 that accompany the new Income-tax Act, 2025.
7.4 What the amendment does not change
8What has happened since the judgment
- 30 Jan 2026
The Delhi bench of the Income Tax Appellate Tribunal applied the ruling in Hareon Solar Singapore Pte. Ltd., denying treaty relief to a Singapore entity with no employees, minimal assets and no independent decision-making. - 31 Mar 2026
CBDT notifications confirm the GAAR carve-out for pre-2017 investments under both the old and new rules. - 1 Apr 2026
The Income-tax Act, 2025 comes into force. Treaty claims now require the new Form 41 (formerly Form 10F), and withholding on payments to non-residents moves to Section 393. - Apr 2026
The tax department confirms that reassessment proceedings for the relevant year against the Tiger Global entities will continue and that the amount withheld will not be refunded. - 2026 onwards
Tax officers are increasingly asking for evidence of substance, board decision-making and commercial rationale in treaty claims, lower withholding applications and assessments.
9Who is affected, and how much
| Structure | Risk after Tiger Global | Key question |
|---|---|---|
| Fund vehicle in Mauritius or Singapore with no staff, managed from elsewhere | High | Where are investment and exit decisions really made? |
| Indirect holding through a foreign company whose value derives from India | High | Is the indirect transfer taxable in India, and can the treaty be relied on? |
| Regional headquarters with real management, staff and multiple country operations | Lower | Is the substance documented and linked to the Indian investment? |
| Direct holding by the ultimate parent in its home country | Lower | Is the treaty claim properly documented with TRC and Form 41? |
| Pre-2017 direct investment in Indian company shares by a substantive treaty resident | Protected from GAAR | Can it withstand a judicial substance review? |
| Post-2017 investment through an intermediate holding company | Elevated | Does the structure have a commercial purpose beyond the treaty benefit? |
10The substance test: what tax authorities will look for
The heart of the judgment is a "head and brain" inquiry: is the holding company genuinely managed and controlled in the country whose treaty it claims? Indian authorities and courts are likely to look at:
Board and decisions
Local directors with relevant expertise who actually deliberate and decide on investments, exits and financing; board minutes that show genuine discussion rather than rubber-stamping.
Financial control
Bank accounts operated locally, with signing authority held by local directors, and no unlimited override by persons elsewhere.
Physical presence
Office premises, local employees, IT infrastructure and expenditure proportionate to the activity.
Commercial rationale
A documented business reason for the structure, such as regional management, pooling of investors, access to finance or regulatory requirements.
Delegations and mandates
Investment management agreements, powers of attorney and approval thresholds that do not strip the local board of real authority.
Tax in the residence state
Evidence that the income is within the tax net of the residence country, and that the entity is not a mere pass-through.
Documents created after the event carry little weight. Substance must exist at the time decisions are made. Start building and recording it now, not when an exit is announced or a notice arrives.
11Planning exits and share transfers after Tiger Global
Exits are where the judgment bites hardest. Both sellers and buyers need to adjust.
11.1 For sellers
- Commission a pre-exit tax review covering treaty eligibility, substance, GAAR, indirect transfer rules and computation of gains.
- Consider applying for a lower or nil withholding certificate (now on Form 128 under the new Rules) well in advance, while recognising that the department will scrutinise substance.
- Consider an advance ruling from the Board for Advance Rulings where certainty justifies the time, bearing in mind that applications concerning prima facie avoidance arrangements will not be admitted.
- Provision for the possibility of Indian tax, interest and penalties in fund economics and distribution waterfalls.
11.2 For buyers
- Remember that the buyer is responsible for withholding tax on payments to non-resident sellers; failure can make the buyer an "assessee in default".
- Negotiate tax escrows, holdbacks, specific indemnities and tax insurance where treaty positions are uncertain.
- Obtain the seller's TRC, Form 41, substance evidence and tax opinions before closing.
- Complete remittance reporting on Forms 145 and 146, and FEMA reporting such as Form FC-TRS for transfers between residents and non-residents.
11.3 For the Indian company
Even where the transaction happens offshore, the Indian company may face reporting obligations, information requests and, in some cases, a representative assessment. Keep statutory registers, including the register of significant beneficial owners, up to date, and record changes in ultimate ownership in board minutes.
12Beyond exits: dividends, royalties and operating subsidiaries
Although Tiger Global concerned capital gains, its reasoning on TRCs and substance applies to every treaty claim. Foreign groups with operating subsidiaries in India should expect closer scrutiny of:
- Dividends paid to an intermediate holding company claiming a reduced treaty withholding rate, where beneficial ownership and substance will be tested.
- Royalties and fees for technical services paid to group entities in treaty jurisdictions, especially where the IP or services are actually provided by another group company.
- Interest on intra-group loans routed through financing entities.
- Lower withholding applications, where officers increasingly ask for substance evidence and structure charts.
Our corporate tax and TDS teams help Indian subsidiaries document treaty positions correctly, and our royalty agreements service aligns contracts with where IP and services genuinely sit.
Direct holding is sometimes simpler. For many operating groups, holding the Indian subsidiary directly from the ultimate parent, or through a regional entity with real management functions, is now more defensible than a thin intermediate vehicle. Any restructuring must itself be reviewed for Indian tax, including indirect transfer and GAAR, and for FEMA compliance.
13Action checklist for foreign holding companies
- Map the structure. Prepare a full chart from the Indian company up to the ultimate owners, with jurisdictions, acquisition dates and the treaty relied on at each level.
- Classify each holding. Direct or indirect, pre- or post-1 April 2017, and the treaty article that would apply on exit.
- Assess substance. Review boards, decision-making, bank mandates, staff, premises and expenditure in each holding jurisdiction, and fix gaps going forward.
- Document commercial purpose. Record the business reasons for each entity in the chain.
- Refresh treaty documentation. Keep TRCs and Form 41 current for every payment, together with substance evidence.
- Review pending and recent exits. Assess exposure on past transactions still open to assessment, and provision where needed.
- Plan future exits early. Build in time for withholding certificates or rulings, and agree risk allocation with buyers.
- Consider alternatives. For new investments, compare direct holding, substantive regional hubs and onshore options such as GIFT City funds.
- Align with FEMA. Any restructuring of the shareholding of an Indian company requires FEMA pricing and reporting compliance.
14How Delhi Legal Company can help
Delhi Legal Company works with foreign parents, funds and their Indian subsidiaries on the Indian side of cross-border structures, from treaty documentation and withholding to share transfers and FEMA compliance.
15Conclusion
The Tiger Global judgment closes an era in which a TRC and a holding company in a treaty jurisdiction were enough to settle India's tax claim on investment gains. Treaty benefits now depend on substance: where decisions are really made, whether the holding company does real work, and whether the structure has a purpose beyond the tax saving. The CBDT's March 2026 amendment removes GAAR risk for genuine pre-2017 investments, but leaves the Court's views on TRCs, indirect transfers and judicial anti-avoidance intact.
For foreign holding companies, the practical response is neither panic nor complacency. Map your structures, test their substance honestly, strengthen what you can for the future, and plan exits and treaty claims with the new standard in mind. Structures with real commercial substance will continue to be respected; those that exist only on paper should expect to be looked through.
Review your holding structure
We will map your Indian holding structure, flag treaty and indirect transfer exposure, and help you document substance and plan exits with confidence.
Call +91-9599332456 | Email info@delhilegalcompany.com
?Frequently asked questions
What did the Supreme Court decide in Tiger Global?
On 15 January 2026, it held that the Tiger Global Mauritius entities could not claim India–Mauritius treaty protection on gains from selling Flipkart Singapore shares in 2018. It found the structure was prima facie designed for tax avoidance, that a TRC is not conclusive, and that treaty grandfathering does not cover indirect transfers.
Is a Tax Residency Certificate still required?
Yes. A TRC remains a necessary condition for claiming treaty benefits, along with Form 41 under the new Income-tax Rules. But it is no longer conclusive: authorities can examine control, management and substance.
Are investments made before 1 April 2017 protected?
Under the CBDT's March 2026 amendment, GAAR does not apply to income from transferring investments made before 1 April 2017. However, treaty grandfathering covers only shares of Indian companies, and judicial anti-avoidance principles can still apply to conduit structures.
Does the judgment apply only to Mauritius?
No. Its reasoning on TRCs, substance and anti-avoidance applies to treaty claims under any treaty, including those with Singapore, the Netherlands and Cyprus, and to treaties that include a principal purpose test through the Multilateral Instrument.
What is an indirect transfer?
The sale of shares in a foreign company that derives its value substantially from assets in India. Gains can be taxed in India if Indian assets exceed ₹10 crore and represent at least 50% of the foreign company's total assets, subject to exclusions such as for small shareholders.
Does the ruling affect dividends and royalties?
Indirectly, yes. The case concerned capital gains, but its approach to TRCs and substance will inform scrutiny of reduced treaty rates on dividends, interest, royalties and fees paid to intermediate holding companies.
What should a buyer do when acquiring from a foreign seller?
Assess whether Indian tax applies, withhold correctly or obtain a lower withholding certificate, and protect itself through escrows, indemnities or tax insurance where the seller's treaty position is uncertain.
What counts as substance for a holding company?
Genuine local management and decision-making, competent local directors, local control of bank accounts, office premises, staff and expenditure proportionate to the activity, and a documented commercial reason for the entity.
Should we restructure our holding company?
Not automatically. Restructuring can itself trigger Indian tax and FEMA requirements. Start with a review of the existing structure and its substance, then decide whether strengthening it or restructuring is the better course.
Has the Tiger Global case ended?
The Supreme Court's ruling on the advance ruling question is final, subject only to limited review. The tax department has indicated that reassessment proceedings for the relevant year will continue.
Disclaimer: This article reflects the position as at 14 October 2026 and is provided for general information only. It does not constitute tax or legal advice or create a professional relationship. The summary of the judgment and of subsequent notifications is based on published commentary; please refer to the full text of the Supreme Court's judgment and the official CBDT notifications, and consult a qualified tax professional before acting on any structure or transaction. In accordance with the rules of the Bar Council of India, this content is not intended as advertisement or solicitation.