REPORTABLE
Authority for Advance Rulings (Income Tax) & Ors
Versus
Tiger Global International II Holdings
CIVIL APPEAL NO. 262 OF 2026
[Arising out of SLP (C) No. 2640 OF 2025]
DATE OF JUDGMENT-15 JANUARY 2026
BRIEF FACTS-
The present appeals arise from a final judgment and common order dated 28.08.2024 passed by the High Court of Delhi at New Delhi1 in W.P. (C) Nos. 6764, 6765 and 6766 of 2020 and are, therefore, disposed of by this common judgment.
ISSUES FOR CONSIDERATION-
11. Evidently, in the present case, the AAR had prima facie found the claim to be an arrangement to avoid tax and hence, the applications fell under the proviso to Section 245R(2) of the Act and were not maintainable. However, the High Court has set aside the order of the AAR and rendered its findings on the merits of the case, by judgment dated 28.08.2024, the correctness of which is challenged before us.
11.1. Though the learned Additional Solicitor General appearing for the appellants – Revenue made elaborate contentions touching all the findings of the High Court, we are inclined to deal with the core issue alone that revolves around the present case, viz.,
“Whether the AAR was right in rejecting the applications for Advance Ruling on the ground of maintainability, by treating the capital gains arising out of a transaction of sale of shares of a Singapore Co., which holds the shares of an Indian company, by a Mauritian company controlled by an American company, to be prima facie an arrangement for tax avoidance, and hence, whether it can be enquired into to ascertain whether the capital gains would be taxable in India under the Income Tax Act read with the relevant provisions of the Mauritius Treaty or not?”
DISCUSSION & ANALYSIS-
47. In the light of the aforementioned provisions and rules, in the case at hand, though it prima facie appears as if the assessees acquired the capital gains before the cut-off date, i.e., 01.04.2017, it is to be noted that the proposal for transfer of investments commenced only on 09.05.2018. A Share Purchase Agreement was executed between Walmart International Holdings Inc., a Delaware Corporation described as the “purchaser”; the shareholders of Flipkart Singapore identified in Schedule I thereto and collectively described as the “sellers”; and Fortis Advisors LLC, a Delaware limited liability company described as the “sellers’ representative”. As per the Share Purchase Agreement, the sale of shares held by the assessees was approved by the Board in its meeting held on 04.05.2018. The subject appears to have arisen for discussion in the meeting held on 12.06.2018, when the Board took note of Walmart’s offer to purchase a controlling stake in Flipkart Singapore for USD 16 billion, and the assessees considered selling 74% of their stake therein and closing the transaction, which occurred after the cut-off date prescribed under Rule 10U(1)(d).
48. In the alternative, even if GAAR is held to be inapplicable, the Revenue invoked the JAAR, grounded in the doctrine of substance over form, consistently recognised in Indian jurisprudence, including McDowell and Vodafone. It was contended that JAAR continues to operate in parallel with GAAR and empowers Indian authorities to deny treaty benefits in cases involving treaty abuse or conduit structures. The Revenue further contended that the respondents themselves acknowledged the applicability of this doctrine by safeguarding against such scrutiny in the Share Purchase Agreement and by furnishing detailed documentation regarding control and management, thereby conceding that mere possession of a TRC is not sufficient. Thus, the Revenue’s position proceeds in a logical sequence. We find force in these contentions and agree with them for the following reasons: First, taxability is established under Section 9(1)(i); second, the availability of treaty relief is contested by challenging the residency claim in view of the prima facie finding that effective management and control were not in Mauritius, the scope of Article 13, and the applicability of Circular No. 789 and Azadi Bachao Andolan in the current factual context; third, GAAR and, in the alternative, JAAR are invoked to pierce the structure and deny treaty benefits where the transaction lacks genuine commercial substance. Though several specific questions were raised by the Revenue, including interpretation of the Mauritius Financial Services Act, the nature of GBLs, and the role of the LOB clause, these issues merely reinforce the three-tier framework for determining taxability in the present case.
49. The Vodafone judgment provides crucial insight into this issue. It implies that business intent behind a transaction serves as strong evidence of whether the transaction is deceptive or an artificial arrangement. The commercial motive
behind a transaction often reveals its true nature. In the present case, the respondents seek exemption from the Indian Income tax while, at the same time, contending that the transaction is also exempt under Mauritian law, which runs contrary to the spirit of the DTAA and presents a strong case for the Revenue to deny the benefit as such an arrangement is impermissible. Here again, it may be stated that this stand would again strengthen the reasoning that whether the sale is of shares of an Indian company then, will not be germane for consideration because only if the assessee is liable to pay tax in Mauritius, he can derive benefit under the provision under Article 13(c) of the DTAA as amended. Section 96(2) places the onus on the taxpayer to disprove the presumption of tax avoidance. This represents a significant shift in the burden of proof. In the case at hand, there is clear and convincing prima facie evidence to demonstrate that the arrangement was designed with the sole intent of evading tax, and the assessees have failed to furnish sufficient material to rebut this presumption. Though it is permissible in law for an assessee to plan his transaction so as to avoid the levy of tax, the mechanism must be permissible and in conformity with the parameters contemplated under the provisions of the Act, rules, or notifications. Once the mechanism is found to be illegal or sham, it ceases to be “a permissible avoidance” and becomes “an impermissible avoidance” or “evasion”. The Revenue is, therefore, entitled to enquire into the transaction to determine whether the claim of the assessees for exemption is lawful.
CONCLUSION:-
50. In our view, once it is factually found that the unlisted equity shares, on the sale of which the assessees derived capital gains, were transferred pursuant to an arrangement impermissible under law, the assessees are not entitled to claim exemption under Article 13(4) of the DTAA. The Revenue has proved that the transactions in the instant case are impermissible tax-avoidance arrangements, and the evidence prima facie establishes that they do not qualify as lawful. Consequently, Chapter X-A becomes applicable. The applications preferred by the assessees relate to a transaction designed prima facie for tax avoidance and were rightly rejected as being hit by the threshold jurisdictional bar to maintainability, as enshrined in proviso (iii) to Section 245R(2). Accordingly, capital gains arising from the transfers effected after the cut-off date, i.e., 01.04.2017, are taxable in India under the Income Tax Act read with the applicable provisions of the DTAA. The judgment of the High Court therefore deserves to be set aside.
