Supreme Court stays Delhi High Court ruling in Tiger Global case

The Supreme Court on Friday stayed the Delhi High Court ruling on the India-Mauritius Double Taxation Avoidance Agreement for private equity firm Glitima, India-Mauritius to make Double profits.Experts believe the ruling could lead to uncertainty for foreign investors.

The division chairpersons JB Pardiwala and R Mahadevan said the matter had pan-India implications and required “careful consideration”.

In its ruling, the Supreme Court stayed an order of the Delhi High Court that granted India tax benefits to Tiger Global. Prior to that, the AAR had denied Tiger Global treaty benefits for the transaction.

The case concerns Tiger Global, which holds a Category 3 Global Business License and Tax Residency Certificate (TRC) from Mauritius and acquired shares of Singapore-based Flipkart between 2011 and 2015. The company had substantial investments in Indian entities. In 2018, Tiger Global sold its stake in the company, resulting in a capital gain. The provision of grandfathering under the India-Mauritius DTA provides for exemption from investment grandfathering and capital gains tax in India for shares acquired before April 1, 2017.

Tax experts noted that several consequences may arise from the decision of the Supreme Court.

Rastogi, a tax and constitutional expert, said the stay would create ambiguity about the applicability of DTAA benefits, particularly to investments through Mauritius. It could affect investor confidence and influence decisions on investment in India and on the interpretation of their provisions may be perceived, potentially leading to policy revisions or changes to prevent treaty abuse by foreign investors.

Rakesh Nangia, managing partner of Nangia & Keck, is questioning the Supreme Court’s ruling on the Delhi High Court’s ruling, and it appears that the stage is set for a heated discussion to prevent potential contract abuse.

In its judgment delivered last year, the Delhi High Court upheld the assessee’s plea that the grandfather contained in the India-Singapore tax treaty was self-sufficient and accordingly, … ..Whether it would be impermissible for the revenue to produce additional roadblocks or standards that the parties would be required to meet. , to avail DTAA benefits, …… “.

AMIT Maheshwari, Tax Partner, AKM Global says that there are several key areas that could have been carefully considered, starting from the interpretation of tax treaties in case of indirect transfer cases, clarifying what is the infrastructure and how relevant are the investments of that entity. to prove that the investment entities do not necessarily have employees sitting in that jurisdiction the verdict was expected and is welcome in this regard,” he said.