Introduction

Recent developments in India’s international tax landscape have drawn significant attention following the Supreme Court ruling in the Tiger Global case. The ruling raised concerns among foreign investors regarding the continued availability of benefits under the India-Mauritius Double Taxation Avoidance Agreement (DTAA).

On January 15, 2026, the Indian Supreme Court ruled that Tiger Global’s $1.6 billion exit from Flipkart (2018) is subject to Indian capital gains tax, denying treaty benefits under the India-Mauritius Double Taxation Avoidance Agreement (DTAA). The Court held that the Mauritius-based entities lacked commercial substance, acting as conduits for tax avoidance.

In response further, India has formally reassured Mauritius that treaty benefits will continue, providing much-needed clarity and stability to cross-border investment structures.

In 2018, Tiger Global-managed funds in the Cayman Islands, via Mauritius intermediaries, sold shares in Flipkart Singapore (which derived value from India) to Walmart.

Tiger Global claimed tax exemption under the India-Mauritius treaty based on Tax Residency Certificates (TRCs)

The Indian Income Tax Department argued the entities were “conduits” with no real commercial substance. SC overturned the Delhi High Court’s previous decision (2024), which had favored the taxpayers. The Apex Court stated that TRCs do not prevent tax authorities from looking into the true nature of an arrangement.

The Mauritius Route: Why It Was Preferred

Foreign investors often structured investments into India through Mauritius due to:

• Favourable capital gains tax provisions
• Regulatory ease
• Established financial ecosystem

This structure enabled investors to optimize tax efficiency, making Mauritius a key jurisdiction for routing foreign investments into India.

 Supreme Court Ruling: A Shift in Approach

The recent Supreme Court ruling (Tiger Global case) has introduced a substance-over-form approach in determining DTAA eligibility.

 Key Observations from the Ruling:

• Tax Residency Certificate (TRC) is not conclusive proof of treaty eligibility
• Authorities may examine the commercial substance of the entity
• Structures lacking real economic activity may be treated as conduit arrangements
• GAAR (General Anti-Avoidance Rules) may be invoked in cases of tax avoidance

This marks a shift from a documentation-based approach to a substantive evaluation of investment structures.

Article 13 of Mauritius-India tax treaty needs a careful and much deeper analysis from case to case, to assess the eligibility for benefits of taxation in Mauritius, and assessment of substance.

Concerns Raised by Investors

The ruling led to concerns such as:

• Potential denial of treaty benefits for Mauritius-based entities
• Increased scrutiny of existing and past investment structures
• Risk of litigation and tax uncertainty
• Impact on India’s attractiveness as an investment destination

India’s Reassurance to Mauritius

To address these concerns, India has clarified that:

• The India–Mauritius DTAA remains fully valid and operative
• Treaty benefits will continue for eligible investors
• There is no intention to undermine the treaty framework
• India remains committed to providing a stable and predictable tax regime

This reassurance is critical in maintaining investor confidence and bilateral relations. However, substance requirements under Article 13 need careful consideration from case to case.

Practical Implications for Investors

While treaty benefits continue, the manner of claiming them has evolved.

Earlier Position:

• TRC was generally sufficient to claim DTAA benefits

Current Position:

• Investors must demonstrate:
  • Genuine commercial substance
  • Real management and control
  • Business purpose beyond tax advantage

Key Considerations:

Aspect	Requirement
Residency	Valid TRC
Substance	Real operations, not shell entity
Management	Decision-making in Mauritius
Documentation	Proper records and governance
Compliance	Alignment with GAAR provisions

Role of GAAR

The General Anti-Avoidance Rule (GAAR) empowers tax authorities to deny tax benefits where:

• The primary purpose of an arrangement is tax avoidance
• The structure lacks commercial substance

Post ruling, GAAR is expected to play a more active role in evaluating cross-border structures.

Conclusion

The recent developments reflect a balanced approach by India:

• Strengthening anti-abuse provisions through judicial interpretation
• Maintaining treaty credibility through policy reassurance

The key takeaway is clear:

DTAA benefits under the India–Mauritius treaty continues to be available, but only for structures with genuine commercial substance and legitimate business purpose.

For investors and advisors, the focus must now shift from form-driven compliance to substance-driven structuring.

Advisory Note

Entities investing through Mauritius should undertake:

• Review of existing structures
• Substance evaluation
• Documentation strengthening
• GAAR risk assessment

to ensure continued eligibility for treaty benefits.

 

By,

Team AnBac Advisors