TRC Alone Not Enough, GAAR Reaches Post-2017 Exit from Pre-2017 Investment, AAR Rightly Rejected Rulings: Supreme Court in AAR v. Tiger Global [2026 INSC 60]

In The Authority for Advance Rulings (Income Tax) & Ors. v. Tiger Global International II Holdings (2026 INSC 60), the Supreme Court held that a TRC is only an eligibility condition under Section 90(4) and not sufficient proof of residence; that after Section 90(2A), Chapter X-A (GAAR) and Rule 10U, earlier circulars and pre-amendment rulings cannot shield an arrangement; and that Rule 10U(2) brings within GAAR a tax benefit obtained on or after 01.04.2017 even from an investment made before that date (paras 27, 36–37, 43, 46). Since the Mauritian sellers' sale of shares of a Singapore company deriving value from India was prima facie a tax-avoidance arrangement, the AAR rightly rejected the applications under proviso (iii) to Section 245R(2) (paras 49–50). A Bench of Justice J.B. Pardiwala and Justice R. Mahadevan allowed the Revenue's appeals, with Justice Pardiwala adding a separate concurring opinion on tax sovereignty (para 51).

Status: Delhi High Court common judgment dated 28.08.2024 in W.P.(C) Nos. 6764, 6765 and 6766 of 2020 set aside; AAR's rejection of the advance-ruling applications held to be correct; all three Civil Appeals allowed with no order as to costs (paras 50–51).

Headnote: Treaty Benefit, TRC and GAAR in Indirect Share Transfers

Income-tax Act, 1961 – Sections 9(1)(i) and Explanation 5, 90(2A), 90(4), 96, 197, 245Q(1) and 245R(2) proviso (iii) – Chapter X-A (GAAR) – Income-tax Rules, 1962 – Rule 10U – India–Mauritius DTAA – Articles 4, 13(3A), 13(4) and 27A – Advance ruling – Prima facie tax avoidance – Tax Residency Certificate – Indirect transfer of shares – Grandfathering – Judicial anti-avoidance rule – Burden of proof.

Held: (i) To claim Article 13(4) of the DTAA, the claimant must be a resident of Mauritius and must also directly hold the shares that are sold; an indirect sale of shares does not, at the threshold, fall within the treaty protection under Article 13 (paras 16–18).

(ii) The amendments after Vodafone to Chapter IX, the insertion of Chapter X-A and the amendments to Rule 10U have changed the scenario; earlier CBDT circulars operate only within the regime in which they were issued, and a TRC alone is not sufficient to avail DTAA benefits (paras 27, 43).

(iii) Under Section 245R(2), a prima facie satisfaction on initial examination of the documents is enough for the AAR to reject an application; the burden lies on the person claiming the fact, and the level of satisfaction required is much less than proof (paras 32, 34–36).

(iv) Section 90(4) treats the TRC only as an eligibility condition, not as sufficient evidence of residence; it does not bind any authority or Court that enquires into it and reaches its own independent conclusion (para 37).

(v) By Rule 10U(2) read with Section 96(2), Chapter X-A applies to a tax benefit obtained on or after 01.04.2017 from any arrangement, whatever its date; the cut-off for investments in Rule 10U(1)(d) stands diluted, and here the sale proposal and transfer came only in 2018 (paras 46–47).

(vi) GAAR, and alternatively the judicial anti-avoidance rule, can be invoked to deny treaty benefits; Section 96(2) places the onus on the taxpayer to rebut the presumption of tax avoidance, which the assessees failed to do, and the AAR rightly rejected the applications (paras 48–50).

(paras 16–51)

Case Details: AAR (Income Tax) v. Tiger Global International II Holdings (2026 INSC 60)

Final Outcome: Civil Appeals allowed; High Court judgment dated 28.08.2024 set aside; AAR's rejection of the applications as being hit by proviso (iii) to Section 245R(2) upheld; no order as to costs.

Case: The Authority for Advance Rulings (Income Tax) and Others v. Tiger Global International II Holdings (with the connected appeals against Tiger Global International III Holdings and Tiger Global International IV Holdings)

Neutral Citation: 2026 INSC 60

Case No.: Civil Appeal No. 262 of 2026 (arising out of SLP (C) No. 2640 of 2025), with Civil Appeal No. 263 of 2026 (arising out of SLP (C) No. 2565 of 2026) and Civil Appeal No. 264 of 2026 (arising out of SLP (C) No. 5987 of 2025)

Court: Supreme Court of India (Civil Appellate Jurisdiction) – Reportable

Date of Decision: 15 January 2026

Bench: Justice J.B. Pardiwala and Justice R. Mahadevan (author); separate concurring opinion by Justice J.B. Pardiwala

Relevant Acts & Sections: Income-tax Act, 1961 – Sections 4, 5, 9(1)(i) with Explanation 5, 90(2A), 90(4), 96(2), 197, 245Q(1), 245R(2) proviso (iii), Chapter X-A; Income-tax Rules, 1962 – Rule 10U; India–Mauritius Double Taxation Avoidance Agreement (as amended by the Protocol of 10.05.2016) – Articles 4, 13 and 27A

Impugned Order: Common judgment dated 28.08.2024 of the High Court of Delhi in W.P.(C) Nos. 6764, 6765 and 6766 of 2020, which quashed the AAR's order dated 26.03.2020 (paras 2, 5.9–5.10)

Counsel: Mr. N. Venkataraman, Additional Solicitor General, for the appellants – Revenue; Mr. Harish Salve, Senior Counsel, for the respondents – assessees (paras 7–8)

Source: Supreme Court of India

Key Holdings of the Supreme Court

• Article 13(4) protection requires that the shares sold be held directly by the Mauritian resident; an indirect transfer does not at the threshold fall within Article 13 (para 18).
• After the statutory amendments, a TRC alone is not sufficient for treaty benefit, and superseded circulars and pre-amendment judgments do not help the assessees (paras 27, 36, 43).
• A TRC is an eligibility condition under Section 90(4), not sufficient evidence of residence, and is not binding on an authority that enquires into it (para 37).
• The AAR needs only a prima facie view that the transaction is for avoidance of tax to reject an application under Section 245R(2) (paras 34–36).
• Rule 10U(2) applies Chapter X-A to tax benefits obtained on or after 01.04.2017, so pre-2017 investment does not escape GAAR when the arrangement yields a later tax benefit (paras 46–47).
• Section 96(2) shifts the onus to the taxpayer; the assessees did not rebut the presumption, and the applications were rightly rejected (paras 49–50).

Brief Facts of the Case

The three assessees are companies incorporated in Mauritius, holding Category I Global Business Licences and Tax Residency Certificates issued by the Mauritius Revenue Authority. They engaged Tiger Global Management LLC, USA, for services relating to their investments. Between 2011 and 2015 they acquired shares of Flipkart Private Limited, a Singapore company whose share value was derived substantially from assets in India (paras 5–5.5).

In 2018, as part of Walmart's majority acquisition of the Singapore company, the assessees transferred their shares to Fit Holdings S.A.R.L., Luxembourg. Their applications under Section 197 for nil withholding were refused on 17.08.2018, the tax authorities holding that control over decisions to buy and sell shares did not lie with them, and withholding certificates at stated rates were issued (paras 5.5–5.6).

The assessees then sought advance rulings under Section 245Q(1) on whether the gains were chargeable to tax in India under the Act read with the DTAA. By order dated 26.03.2020, the AAR rejected the applications under proviso (iii) to Section 245R(2), finding the transaction prima facie designed for avoidance of tax and the control and management of the assessees to lie in the USA (paras 5.7–5.9, 6.1–6.10).

The Delhi High Court, by its judgment dated 28.08.2024, quashed the AAR's order, holding that the assessees were entitled to treaty benefits, that the TRC raised a presumption of residence and beneficial ownership, and that the transfers stood grandfathered under Article 13(3A). The Revenue appealed; on 24.01.2025 and 04.02.2025 the Supreme Court stayed the High Court judgment and the assessment proceedings (paras 5.10, 6.11–6.22, 10).

Issues Before the Supreme Court

1. Whether the AAR was right in rejecting the applications as not maintainable by treating the capital gains from the sale of shares of a Singapore company, holding shares of an Indian company, by Mauritian companies said to be controlled by an American company, as prima facie an arrangement for tax avoidance (para 11.1).
2. Whether, therefore, the transaction can be enquired into to ascertain whether the capital gains are taxable in India under the Income-tax Act read with the India–Mauritius DTAA (para 11.1).

Court's Findings and Reasoning

Scope of Article 13 (paras 15–19): Article 13(2) and 13(3A) depend on the situs of the company whose shares are directly held and sold. For Article 13(4), the claimant must be a Mauritian resident and must directly hold the shares sold; an indirect sale does not, at the threshold, come within the treaty. The object of the DTAA is to prevent double taxation, not to facilitate avoidance, and the assessee must establish its residence with all relevant documents.

Effect of later amendments (paras 27–29): Relying on K.P. Varghese, Anjum M.H. Ghaswala and Hindustan Construction Company, the Court held that circulars, though binding when issued, operate only within their legal regime and cannot override later statutory amendments, and Parliament may remove the basis of a judicial decision. The analysis is two-step: domestic taxability under Section 9(1)(i) and Explanation 5, and then whether the DTAA curtails it, including residence under Article 4 and the scope of Article 13.

Prima facie threshold under Section 245R(2) (paras 32–36): Drawing on McDowell, the Court noted that Parliament has empowered the AAR to reject applications at the threshold where a transaction appears prima facie tax-avoidant. Referring to Balvir Singh and Martin Burn, it held that a prima facie view on initial examination is enough. The High Court erred in relying on pre-amendment rulings to hold that no such presumption could be drawn because the assessees had existed since 2011.

Status of the TRC (paras 37–38, 43): A TRC is an eligibility condition, not sufficient evidence of residence. It does not bind an authority or Court that enquires into it, and the TRC relied on here merely recorded assertions without independent verification. Holding a TRC cannot prevent an enquiry if the interposed entity was a device to avoid tax.

The 2016 Protocol and LOB clause (paras 40–42, 45): The Protocol was meant to close the door to treaty shopping, conduit structures and round-tripping. The LOB clause did not apply, as it is confined to cases under Article 13(3B); India's anti-avoidance provisions remain relevant in testing treaty applicability.

GAAR and grandfathering (paras 46–47): GAAR applies to the assessment year in question. Rule 10U(1)(d) excludes income from transfer of investments made before 01.04.2017, but Rule 10U(2) and Section 96(2) apply Chapter X-A to any arrangement, whatever its date, in respect of a tax benefit obtained on or after 01.04.2017. Here, although the shares were acquired before the cut-off, the transfer proposal began on 09.05.2018 and the sale closed after the cut-off.

JAAR and burden of proof (paras 48–49): The Court accepted the Revenue's three-tier framework: taxability under Section 9(1)(i); contested treaty relief, given the prima facie finding that effective management was not in Mauritius; and GAAR or, alternatively, JAAR to pierce the structure. Relying on Vodafone, it noted that the assessees sought exemption in India while claiming the gains were also exempt in Mauritius, contrary to the spirit of the DTAA. Section 96(2) placed the onus on them, and they failed to rebut the presumption of tax avoidance.

Concurring opinion of Justice J.B. Pardiwala (concurring opinion, paras 1, 18–20, 30–34): Agreeing fully with the main judgment, Justice Pardiwala stressed that taxing income arising in a country is an inherent sovereign right, that tax sovereignty should be retained rather than yielded through treaties, and listed safeguards for future treaties, including LOB clauses, a GAAR override, source-based taxation rights, exit or renegotiation clauses and periodic review.

Final Outcome and Directions

• The transactions were held, prima facie, to be impermissible tax-avoidance arrangements, so the assessees are not entitled to claim exemption under Article 13(4) and Chapter X-A applies (para 50).
• The AAR rightly rejected the applications under proviso (iii) to Section 245R(2) (para 50).
• Capital gains from the transfers effected after the cut-off date of 01.04.2017 are taxable in India under the Income-tax Act read with the DTAA (para 50).
• All three appeals allowed and the High Court judgment set aside; no order as to costs; pending applications disposed of (paras 51–52).

Legal Principle Laid Down

After the insertion of Section 90(2A), Chapter X-A and Rule 10U, a Tax Residency Certificate is only an eligibility condition and does not bar an enquiry into whether an interposed treaty-resident entity is a device to avoid tax. The grandfathering of pre-01.04.2017 investments under Rule 10U(1)(d) does not protect a tax benefit obtained on or after that date from an arrangement, as Rule 10U(2) applies GAAR to it. The AAR may reject an advance-ruling application under proviso (iii) to Section 245R(2) on a prima facie view of tax avoidance, and Section 96(2) puts the onus on the taxpayer to rebut it (paras 27, 34, 37, 43, 46, 49–50).

Precedents Relied Upon

• McDowell & Company Ltd. v. Commercial Tax Officer, (1985) 3 SCC 230 – Relied upon – colourable devices are not legitimate tax planning. Discussed at paras 31, 48.
• Vodafone International Holdings B.V. v. Union of India, (2012) 6 SCC 613 – Relied upon – the Revenue can look at the transaction as a whole; business intent shows whether an arrangement is artificial. Discussed at paras 6.7, 12.11, 49.
• Union of India v. Azadi Bachao Andolan, (2004) 10 SCC 1 – Explained – a treaty is a bargain between sovereign States; its reliance on circulars did not help the assessees after the amendments. Discussed at paras 39, 44, 48.
• K.P. Varghese v. Income-Tax Officer, Ernakulam, AIR 1981 SC 1922 – Referred to – binding nature of CBDT circulars. Discussed at para 25.
• Commissioner of Income-Tax v. Anjum M.H. Ghaswala, 2001 INSC 519 – Referred to – CBDT circulars under Section 119 bind tax authorities. Discussed at para 26.
• Hindustan Construction Company Limited v. Union of India, 2020 (17) SCC 324 – Relied upon – Parliament may remove the basis of a judicial decision. Discussed at para 27.
• Balvir Singh v. State of Uttarakhand, AIR 2023 SC 5551 and Martin Burn Ltd. v. R.N. Banerjee, AIR 1958 SC 79 – Relied upon – meaning of a prima facie case. Discussed at paras 34–35.

Important Paragraphs of the Judgment

Verbatim extracts from the judgment. For the full text, refer to the judgment PDF below.

Para 18: "Thus, an indirect sale of shares would not, at the threshold, fall within the treaty protection contemplated under Article 13."

Para 27: "After the amendment has come into effect, there can be no doubt whatsoever that a TRC alone is not sufficient to avail the benefits under the DTAA, and reliance upon earlier judgments dealing with circulars issued in the pre-amendment regime cannot ipso facto come to the aid of the respondents."

Para 37: "The TRC is not binding on any statutory authority or Court unless the authority or Court enquires into it and comes to its own independent conclusion."

Para 46: "Therefore, the prescription of the cut-off date of investment under Rule 10U(1)(d) stands diluted by Rule 10U(2), if any tax benefit is obtained based on such arrangement. The duration of the arrangement is irrelevant."

Para 50: "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)."

Para 19 (concurring opinion of J.B. Pardiwala, J.): "Taxing an income arising out of its own country is an inherent Sovereign right to that country."

Practical Impact of the Ruling

• For foreign investors using treaty jurisdictions: A TRC and a Global Business Licence will not by themselves secure treaty exemption; the Revenue can examine where control and management actually lie (paras 37, 43, 48).
• For exits from pre-2017 investments: Grandfathering of the investment does not exclude GAAR where the tax benefit from the arrangement arises on or after 01.04.2017 (paras 46–47, 50).
• For indirect transfers: Sales of shares of a foreign company deriving value from India are taxable under Section 9(1)(i) and Explanation 5, and an indirect sale does not, at the threshold, fall within Article 13 treaty protection (paras 18, 28).
• For advance-ruling applicants: The AAR may reject an application at the threshold on a prima facie view of tax avoidance, and the onus to rebut lies on the applicant (paras 34, 49–50).
• For tax administrators: Pre-amendment circulars such as Circular No. 789 do not override Section 90(2A), Chapter X-A or Rule 10U (paras 27, 43).

FAQs on Treaty Benefits and Tax Residency Certificates

1. What did the Supreme Court decide in AAR v. Tiger Global?

It held that the AAR rightly rejected Tiger Global's advance-ruling applications as relating to a transaction prima facie designed for tax avoidance, and set aside the Delhi High Court judgment granting treaty benefit (paras 50–51).

2. Is a Tax Residency Certificate enough to claim India–Mauritius treaty benefits?

No. After the amendments, a TRC is only an eligibility condition under Section 90(4); it is not sufficient evidence of residence and does not prevent an enquiry into whether the entity is a device to avoid tax (paras 27, 37, 43).

3. Does grandfathering protect shares bought before 1 April 2017?

Not where GAAR applies. Rule 10U(2) applies Chapter X-A to a tax benefit obtained on or after 01.04.2017 from any arrangement, diluting the cut-off for investments in Rule 10U(1)(d) (para 46).

4. What standard does the AAR apply under Section 245R(2)?

A prima facie standard: it is enough if, on an initial examination of the documents, the AAR is satisfied that the transaction is for avoidance of income tax (para 34).

5. Who bears the burden of proof under GAAR?

Section 96(2) places the onus on the taxpayer to disprove the presumption of tax avoidance; here the assessees failed to rebut it (para 49).

Keywords: 2026 INSC 60, AAR v. Tiger Global, Tiger Global Flipkart case, India–Mauritius DTAA, Article 13(4), Article 13(3A), Tax Residency Certificate, Section 90(4), Section 245R(2), advance ruling, GAAR, Chapter X-A, Rule 10U(2), grandfathering, indirect transfer, Explanation 5 to Section 9(1)(i), JAAR, treaty shopping, tax sovereignty, Justice R. Mahadevan, Justice J.B. Pardiwala, Supreme Court judgment

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Download Judgment PDF – AAR (Income Tax) v. Tiger Global

Judgment PDF: 2026 INSC 60 – The Authority for Advance Rulings (Income Tax) & Ors. v. Tiger Global International II Holdings (Civil Appeal Nos. 262–264 of 2026) – Download Judgment PDF

Source: Supreme Court of India (official website).