[Opinion] When GAAR Meets Grandfathering | The Real Issue in Tiger Global

Pramod Kumar – [2026] 183 taxmann.com 617 (Article)

In the weeks since the Supreme Court delivered its judgment in Tiger Global, much of the legal debate has centred on its implications for the interpretation of tax treaties in India and the broader international tax order. While, as underscored in Justice Mahadevan’s lead opinion, the era of treaty shopping is indeed a relic of the past—out of step with the prevailing value system of international taxation—and while Justice Pardiwala, in his forward looking concurring note, rightly stresses the need for tax sovereignty to be reflected in policy design, those are broader themes of tax policy. The crux of this dispute is narrower – the grandfathering protection, crafted through delegated and executive action as the vehicle for conveying the tax administration’s assurance, and therefore expected to carry that assurance with clarity and without equivocation. The legal debate in this case must, therefore, remain clinically confined to that question – whether this grandfathering commitment is honoured not merely in its letter, but in its spirit. To my mind, more than a question of treaty interpretation, the real issue at the heart of this appeal—and in similar cases that will follow—is the interpretation of the grandfathering provisions. In other words, the case tests how faithfully the Indian tax administration is prepared to honour a consciously made promise of temporal protection when anti avoidance concerns later become pressing.

1. Why Grandfathering, Not Treaty Interpretation, Is the Real Issue

This perspective is important for a simple reason. In Tiger Global, treaty benefits were denied by invoking the overriding nature of GAAR, as embedded in section 90(2A). If, on the facts of this case, the grandfathering provisions in Rule 10U(1)(d) were held to apply, there would have been no occasion to fall back on GAAR at all. Everything, therefore, ultimately hinges on how we understand and interpret the grandfathering provisions. As I say this, I am fully conscious of the Supreme Court’s observation that “GAAR, and in the alternative JAAR, are invoked to pierce the structure and deny treaty benefits where treaty transactions lack genuine commercial substance.” I will return to these observations a little later. For the moment, let me only say that, when read in their proper perspective, they do not, in my respectful view, detract from the centrality of the grandfathering issue or undermine the proposition I am advancing.

Let me now turn to the idea of grandfathering itself. The nature of grandfathering provisions is inherently peculiar and embeds a conflict of fundamental judicial values. They are built on a tension between legal certainty and the protection of legitimate expectations, on the one hand, and the judicial commitment to curb abusive arrangements and protect the tax base, on the other. In Tiger Global, that dichotomy seems, in my respectful reading, to have influenced—perhaps at a subliminal level—the judicial thought process, and may well have nudged the outcome away from what a purely treaty textual analysis might otherwise have yielded. To understand this conflict, it is essential to take a closer look at the concept of grandfathering and what we think it is meant to protect.

2. Grandfathering – Inglorious Origin, Enduring Function

The expression “grandfathering”, now invoked as a device of fairness and protection of reliance interests, has a far more disquieting origin. Its roots lie in the voting laws of the American South at the turn of the twentieth century. After the American Civil War, and particularly following the Fifteenth Amendment, the right to vote could no longer be denied on the grounds of race, yet that promise was methodically undermined. States like Louisiana, North Carolina, Alabama, Georgia, and Oklahoma introduced literacy tests and poll taxes that disproportionately affected newly enfranchised Black voters, while creating a carefully crafted exception for those whose fathers or grandfathers could vote before 1 January 1867—a date chosen precisely because it preceded effective Black political empowerment. Effectively, if a citizen’s grandfather did not have the right to vote (which most blacks did not have), he was not allowed voting rights without additional literacy tests and poll taxes. That is how the term “grandfather clause” acquired its name—from these provisions that exempted those whose grandfathers could vote from the new tests and taxes—and it is this history that now underlies our use of “grandfathering” to describe protecting existing rights when the law changes. The law complied with equality in form while subverting it in substance, until the United States Supreme Court in Guinn v. United States recognised that a constitutional guarantee cannot be nullified by drafting artifice.

Although the historical origins of the term lie in a very different and deeply troubling context, the metaphor illuminates the conceptual paradox embedded in modern legal grandfathering. The doctrine of grandfathering presents a subtle yet profound paradox in the architecture of legal values. It is conceived in fairness, for it shields those who had once acted in accordance with the law as it then stood, thereby preserving the sanctity of settled expectations. Yet, in its very design, it engenders a disquieting asymmetry—for it permits identical acts, separated only by the accident of time, to yield diametrically opposite consequences. Thus, it reconciles continuity with inequality, stability with disparity, and fairness to the past with unevenness in the present. Still, the constitutional order does not measure the legitimacy of such doctrines by the uniformity of their outcomes but by the validity of their source. Once a grandfathering provision finds sanction in the Constitution, or is duly enacted by a competent legislative or executive authority, its implementation becomes a matter of constitutional fidelity rather than moral preference. The judicial conscience may acknowledge the tension it embodies, but the rule of law demands that what is constitutionally ordained must prevail, however uneasy its equilibrium between principle and pragmatism. On a practical note, thus, as long as grandfathering is constitutionally valid and is embedded in the policy, it is to be honoured in letter and in spirit.

There is an irony here that should not be lost on us. A term born in the service of exclusion now describes a doctrine aimed at protecting vested rights and ensuring fairness in transitions. Its history is a reminder that the architecture of law can either preserve constitutional purpose—or quietly dismantle it. That, I would suggest, is also the lens through which we should view modern tax grandfathering promises. Used well, grandfathering is a way of managing change rather than avoiding it. It minimises the disruptive impact of legal and policy shifts, reduces resistance by assuring existing stakeholders that their settled positions will not be disturbed, and often makes politically difficult but socially beneficial reforms possible. Policymakers reach for grandfathering when they want to move to a cleaner or stricter regime—whether in tax, regulation, or subsidies—without causing sudden economic dislocation or perceived unfairness to those who acted in reliance on the old framework. In that sense, it can serve larger causes—reform, stability, and trust in the legal system—even though, in a narrow equality sense, it does treat similarly placed persons differently purely by reference to time.

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