Supreme Court Tiger Global Ruling: GAAR Overrides TRC & Treaty Protection

There is a lot of talk going around with tiger global ruling. India’s Supreme Court has delivered a landmark tax judgment that will significantly impact foreign investors, venture capital funds, and offshore holding structures.

In its ruling dated 15 January 2026, the Supreme Court of India held Tiger Global Management liable to pay capital gains tax in India on its USD 1.6 billion Flipkart exit (2018)-despite routing the transaction through Mauritius entities and holding valid Tax Residency Certificates (TRCs).

The verdict sends a clear message:
Substance will override form. GAAR can override treaty benefits and TRCs.

Background of the Case: What Tiger Global Did

Tiger Global exited its investment in Flipkart by selling shares through Mauritius-based holding companies, claiming:

• Capital gains exemption under India-Mauritius DTAA

• Protection due to grandfathering provisions

• Valid Tax Residency Certificates (TRCs) from Mauritius

However, Indian tax authorities alleged that:

• The Mauritius entities were conduit companies

• They lacked commercial substance

• The primary purpose of the structure was tax avoidance

Accordingly, authorities invoked GAAR (General Anti-Avoidance Rule).

What Is GAAR? (Quick Refresher)

GAAR is contained in Chapter X-A of the Income-tax Act, 1961 and empowers tax authorities to deny tax benefits if an arrangement is:

• Primarily designed to obtain tax benefits

• Lacking commercial substance

• Misusing or abusing tax treaty provisions

• Not at arm’s length

Importantly, GAAR applies even if the transaction is technically legal.

Journey of the Case: From AAR to Supreme Court

1. Authority for Advance Rulings (AAR)
    Denied treaty benefits; upheld GAAR invocation

2. Delhi High Court
    Ruled in favour of Tiger Global, accepting TRC and treaty protection

3. Supreme Court of India
    Overturned Delhi HC decision
    Held GAAR supersedes TRC and treaty protection

This final ruling has now settled the law.

The Grandfathering Argument — And Why It Failed

What Tiger Global Argued

Tiger relied on grandfathering provisions, claiming that:

• Investments made before 1 April 2017 are protected

• Article 13(4A) of India–Mauritius DTAA exempts such gains

• Rule 10U restricts GAAR for grandfathered investments

What the Supreme Court Held

The Supreme Court clarified that:

• Grandfathering applies only to direct shares of Indian companies (Article 13(3A))

• Indirect transfers fall under the residual clause

• Tiger’s structure involved indirect transfers, hence no grandfathering

• Rule 10U(2) allows GAAR to apply to post-April 1, 2017 tax benefits, even if the investment was made earlier

Grandfathering is not a blanket shield.

Key Takeaway: TRC Is Not Conclusive Proof

The Court clearly held that:

• A Tax Residency Certificate is not conclusive

• It is only one piece of evidence

• Authorities are entitled to examine:

  • Commercial substance

  • Decision-making authority

  • Economic risk and control

This aligns India with global BEPS principles.