Tiger Global loses Indian tax case linked to Walmart-Flipkart deal in blow to offshore playbook

India’s Supreme Court has ruled against Tiger Global in a tax case stemming from its exit from Flipkart during its 2018 acquisition of Walmart, a decision that strengthens New Delhi’s ability to challenge offshore treaty structures and could increase the tax risks for global funds that rely on predictable exits from one of the world’s fastest-growing major markets.

On Thursday, the Indian Supreme Court backed tax authorities in a dispute over whether Tiger Global can use its Mauritius-based entities to claim protection under the India-Mauritius tax treaty and avoid paying capital gains tax in India on profits tied to its exit from the Walmart-Flipkart deal. The decision overturned a 2024 Delhi High Court ruling that had set aside a 2020 order by the advance ruling body, which had found that the company was, prima facie, avoiding tax and therefore ineligible for treaty relief.

The ruling is being watched closely by investors, as it strengthens India’s hand in challenging offshore “treaty steering” structures that have long been used to reduce taxes on high-value exits. This may also increase uncertainty about how future cross-border deals will be structured and priced, at a time when foreign funds are relying on India as a key market for growth.

In its ruling, a two-judge bench said (PDF) that when a deal appears, prima facie, to be designed to avoid income tax, India’s advance ruling mechanism cannot be used to seek protection.

Tiger Global first invested in Indian e-commerce company Flipkart in 2009 with an initial investment of $9 million, before increasing its exposure to about $1.2 billion across multiple funding rounds, TechCrunch had previously reported. The company later sold its stake to Walmart for about $1.4 billion in 2018.

The tax dispute centers on how Tiger Global structured this investment – ​​through entities in Mauritius – and whether those vehicles can claim protection under the India-Mauritius tax treaty to shield capital gains from Indian taxes.

During the Flipkart stake sale during the $16 billion Walmart deal, Tiger Global sought a certification that would not allow any tax to be withheld, arguing that because the shares were acquired before April 1, 2017, the gains were exempt from Indian capital gains tax under the “grandfather” clause, protecting old investments from the newer tax regime, in the India-Mauritius Double Taxation Avoidance Agreement. Indian tax authorities rejected the application in 2020, questioning the offshore structure chosen by the investment company.

The Supreme Court bench framed the dispute as a matter of sovereign tax powers, warning against structures that aim primarily to weaken that power.

“The taxation of income arising from one’s own country is an inherent sovereign right of that country,” the council said, adding that “any dilution of this power through artificial arrangements represents a direct threat to its sovereignty and long-term national interest.”

“The ruling should be read as a warning against aggressive tax planning rather than a wholesale dismantling of the India-Mauritius Treaty framework,” Ajay Ruti, a tax expert and founder and CEO of tax consultancy TaxCompass, wrote on X. He said the decision reinforces a broader shift toward “substance over form,” suggesting that treaty protections may not automatically apply when offshore entities lack real business activity.

Tiger Global did not respond to a request for comment.

The company can request a review of the ruling, although such petitions are rarely successful.