[Opinion] Tiger Global Case And Substance Over Form Doctrine

CA Mithilesh Reddy & CA Rajesh Vaishnav – [2026] 182 taxmann.com 415 (Article)

Treaty Protection, GAAR, and the Quiet Deep dive of Section 90 of IT Act, 1961

I. Introduction: From form-based comfort to substance-driven scrutiny

The latest Supreme Court’s (SC) judgment in Authority for Advance Rulings (Income Tax) v. Tiger Global International II, Holdings [2026] 182 taxmann.com 375 (SC)represents far more than a ruling on the maintainability of an advance ruling application under Section 245R of the Income-tax Act. 1961 (the Act) . It is part of a discernible and consistent judicial trajectory in recent years one in which the Court has repeatedly reaffirmed that economic substance must prevail over legal form, even where the taxpayer’s position is supported by facially valid documentation such as Tax Residency Certificates (TRC), carefully drafted contracts, or formally compliant structures.

When read alongside decisions of other recent judgements pronounced by Hon’ble SC such as Hyatt International Southwest Asia Ltd. v. Addl. DIT [2025] 176 taxmann.com 783/306 Taxman 241/478 ITR 238 (SC) and Pride Foramer S.A. v. CIT [2025] 179 taxmann.com 464/307 Taxman 371/481 ITR 1 (SC) Tiger Global reflects a deeper methodological shift: the Court is increasingly unwilling to allow formal compliance to truncate substantive enquiry, particularly where the statutory scheme indicates a legislative intent to prioritise anti-avoidance over certainty. This shift has profound implications for international structuring, treaty interpretation, and the operation of Section 90 of the Act, especially after the advent of General Anti Avoidance Rule (GAAR).

II. The Factual Setting: Structure, Exit, and the AAR Bar

The assesses in Tiger Global were Mauritius-incorporated investment holding companies, each holding a Category I Global Business Licence and TRCs issued by the Mauritius Revenue Authority. Between 2011 and 2015, these entities acquired shares in Flipkart Private Limited (Singapore), an intermediate holding company whose value was substantially derived from Indian assets.

In 2018, pursuant to Walmart Inc.’s global acquisition of Flipkart, the assessees exited their investments by selling the Singapore shares to a Luxembourg purchaser. Before completing the transaction, they sought nil-withholding certificates under Section 197. When these were denied and withholding rate was prescribed, they approached the Authority for Advance Rulings (AAR) under Section 245Q(1) of the Act, seeking a ruling on the taxability of the capital gains under the Act read with the India–Mauritius Double Tax Avoidance Agreement (DTAA).

The AAR in 2020 refused to admit the applications, invoking proviso (iii) to Section 245R(2), holding that the transaction was prima facie designed for avoidance of income-tax. The Delhi High Court (HC) vide the final judgment and common order dated 28-08-2024 overturned this decision.

Hon’ble Delhi HC among various other observations held that TRC certification is to be respected by the Revenue, and any attempt to pierce the corporate veil must be grounded in compelling evidence of tax fraud, sham transactions, or complete absence of economic substance. It also noted that the rulings of the Apex Court in the case of Union of India v. Azadi Bachao Andolan [2003] 132 Taxman 373/263 ITR 706 (SC) and Vodafone International Holdings B.V. v. Union of India [2012] 171 taxmann.com 202/204 Taxman 408 /341 ITR 1 (SC) were before a statutory framework on tax residency and that Circular’s (No. 789 of 2000) position on TRC for both fiscal and beneficial ownership should suffice. Additionally, the Limitation of Benefits (LOB) and the Article 13(3A) read along with Article 13(3B) would be superseding the domestic provisions under Chapter XA of the Act [i.e., phrase “without prejudice” in Rule 10U(2) signified that it would apply only in scenarios not already addressed by Rule 10U(1)(d)].

Hon’ble SC, however, has now restored the AAR’s approach and, in doing so, laid down principles that now resonate far beyond advance rulings. It is start of new era of interpretation, where finer reading of previous judgements while taking note of point in time at which the same were pronounced, the facts on hand and deeper discovery of intent of underlying concepts of international taxation, especially in the context of tax structuring and tax planning takes centre stage.

III. Section 245R(2): Why “Designed for Avoidance” is no longer a narrow gate

Proviso (iii) to Section 245R(2) of the Act bars the AAR from admitting an application where the question raised relates to a transaction prima facie designed for avoidance of income-tax. For years, this proviso was treated as an exceptional exclusion, lest the very purpose of advance rulings certainty be defeated.

Tiger Global decisively alters that balance. The Court holds that the enquiry cannot be confined to the exit transaction viewed in isolation. Instead, where capital gains are concerned, the entire arrangement acquisition, holding pattern, governance, control, and exit constitutes the relevant unit of analysis. A design for avoidance may therefore be long-drawn, and need not be evident from the final step alone. In the instant case, the TRC relied upon is non-decisive, ambiguous and ambulatory, merely recording futuristic assertions without any independent verification. Thus, the TRC lacks the qualities of a binding order issued by an authority.

This reasoning is critical. It allows Revenue authorities to look behind formally compliant exits and examine whether the structure, viewed holistically, reflects a genuine commercial arrangement or one primarily oriented towards tax advantage.

Click Here To Read The Full Article