Flipkart Sale Gains Taxable In India Despite TRC | SC

Case Details: Authority for Advance Rulings (Income-tax) vs. Tiger Global International II Holdings - [2026] 182 taxmann.com 375 (SC) 

Judiciary and Counsel Details

• J.B. Pardiwala & R. Mahadevan, JJ.

Facts of the Case

The assessee, a company incorporated in Mauritius, held shares of a Singapore company (Flipkart), which had investments in multiple Indian companies and derived substantial value from assets located in India. As part of a wider transaction involving the majority acquisition of Flipkart by Walmart, a US company, the assessee transferred its shares in Flipkart to a Luxembourg entity (Fit Holdings S.A.R.L) and claimed that the resulting capital gains were not taxable in India under the India–Mauritius DTAA.
The Authority for Advance Rulings (AAR) rejected this claim, holding that the applications preferred by the assessees relate to a transaction or issue which is prima facie designed for the avoidance of income tax. The assessee filed a writ petition before the High Court.

The High Court set aside the AAR’s order, noting that the transaction was not intended for tax avoidance and was protected by the grandfathering provisions of Article 13(3A) of the DTAA. The matter reached to the Supreme Court.

After further review by the SC, it was decided that following the insertion of section 90(2A), sections 90(4) and 90(5) of the Income-tax Act, the introduction of Chapter X-A (GAAR), and the inclusion of article 27A in the DTAA, merely possessing a Tax Residency Certificate is not sufficient to definitively prove treaty eligibility or prevent the revenue from investigating potential treaty abuse.

High Court Held

It was further held that the grandfathering benefit under article 13(3A) is restricted to direct transfers of shares of an Indian company and does not extend to indirect transfers covered by the residual article 13(4), and that where unlisted equity shares are transferred pursuant to an arrangement impermissible in law, the assessee cannot claim exemption under article 13(4).
Accordingly, upon a consideration of the facts as established on record, the transactions were held to constitute impermissible tax-avoidance arrangements attracting the provisions of Chapter X-A, with the result that the capital gains arising from transfers effected on or after 1 April 2017 were held to be taxable in India.

List of Cases Reviewed

• Tiger Global International III Holdings v. Authority For Advance Rulings (Income-tax) [2024] 165 taxmann.com 850 (Delhi) [Para 51] – Set aside