I-T dept to proceed with Tiger Global's capital gains tax assessment in 2018 Flipkart-Walmart deal

New Delhi, Jan 16 (PTI) The Income Tax department will now proceed to complete the tax assessment on capital gains made by Tiger Global when it exited from Flipkart in 2018 by selling its holding to Walmart for Rs 14,500 crore, CBDT sources said on Friday.

The Income Tax department has been waiting for the Tiger Global case to reach its closure at the legal fora before proceeding with the assessment, sources said, adding that all tax disputes cannot be labelled as 'over-reach or tax terrorism' as many of them arise from "genuine differences of interpretation in evolving areas of law".

In 2018, US-based Walmart Inc acquired a controlling stake in Flipkart in a global transaction valued at approximately USD 16 billion. As part of this transaction, the three Tiger Global Mauritius entities exited a substantial portion of their investments.

The exit resulted in significant capital gains, with the aggregate consideration received exceeding Rs 14,500 crore.

At the time of the transaction, Tiger Global sought relief from withholding on the basis of its claim of non-taxability.

Sources in the Central Board of Direct Taxes (CBDT) said the TDS Assessing Officer examined the issue at a prima facie level, and instead of granting a Nil withholding certificate, the officer issued reduced-rate withholding certificates, after recording that control over the entities did not appear to lie in Mauritius. Based on these certificates, tax was deducted at source.

The total tax withheld across the three Tiger Global entities amounted to approximately Rs 967.52 crore.

"The withholding was not a final determination of tax liability. It was an interim measure, taken in a situation where taxability itself was disputed and could not be conclusively decided at the remittance stage," CBDT sources said, adding that as a consequence of the Supreme Court judgment, the assessment proceedings for AY 2019-20, which had remained stayed in substance, will now revive.

"The Assessing Officer will now proceed to complete the assessments in line with the Supreme Court's ruling. The refund claimed of approximately Rs 967.52 crore, already withheld under section 241A, will now be dealt with as part of the assessment and consequential demand proceedings," sources said.

According to CBDT sources, the Supreme Court judgment recognised the centrality of the economic and fiscal sovereignty of a modern nation and state's legitimate interest in safeguarding public revenue.

"In high-value transactions, the tax figures will inevitably be large. The numbers flow from the size of the transaction itself. Pending demands or withheld refunds in such cases should not automatically be viewed as arbitrary or coercive. They often reflect unresolved questions of law awaiting final judicial determination," they added.

The Supreme Court on Thursday ruled in favour of the Indian tax department's demand for the levy of tax on capital gains on Tiger Global, following its exit from e-commerce company Flipkart in 2018.

The Supreme Court reversed the 2024 Delhi High Court judgment and ruled that the transaction of the Tiger Global Mauritius entities selling shares (indirect transfer) of Flipkart Singapore is exigible to tax in India.

Tiger Global International II, III, and IV Holdings (TGI) are Mauritius-based private companies established to conduct investment activities on behalf of Tiger Global Management LLC (TGM), a US-based company.

TGI had acquired shares in Flipkart Singapore between 2011 and 2015, which derived substantial value from assets located in India. Tiger Global exited from Flipkart in 2018, when Walmart Inc. acquired a controlling stake in the Indian e-commerce company.

Tiger Global argued that no capital gains tax was payable in India on the transaction as the capital gains arose from investments made prior to April 1, 2017, and were therefore covered by the grandfathering provisions of the India-Mauritius tax treaty.

Also, its Mauritius entities held valid Tax Residency Certificates (TRCs) issued by the Mauritius authorities, and hence it claimed full treaty protection and a nil tax liability in India.

The Income Tax department, based on examination of the overall structure and surrounding facts, was of the view that the Mauritius entities were interposed entities, with limited commercial substance of their own, and the real control and decision-making in respect of the investments and the exit lay outside Mauritius. It argued that the arrangement appeared to be structured primarily to obtain treaty benefits, raising concerns of treaty abuse and impermissible avoidance.

Sources said Tiger Global had filed ITR for Assessment Year 2019-20, and claimed a refund of the entire TDS amount, reiterating its position that no tax was payable in India. At the same time, the department treated the income as potentially taxable, subject to final determination of the treaty issue.

The I-T department withheld the refund claim of Rs 967.52 crore, given the pendency of proceedings, and the assessment proceedings became inextricably linked to the outcome of the legal dispute on treaty eligibility.

In 2020, the Authority for Advance Rulings (AAR) decided the issue against Tiger Global, holding that the arrangement was designed to avoid tax and that treaty benefits were not available.

In August 2024, the Delhi High Court reversed the AAR ruling and accepted Tiger Global's position, holding that the grandfathering provisions applied and that the TRC was sufficient in the facts of the case. The revenue department challenged this decision before the Supreme Court.

In January 2025, the Supreme Court stayed the High Court judgment.

CBDT sources said since the core issue of taxability itself was subjudice before the Supreme Court, the I-T department could not progress with the assessment proceedings for AY 2019-20, and the assessments remained in abeyance due to legal necessity.

By judgment dated January 15, 2026, the Supreme Court allowed the revenue department's appeals and ruled against Tiger Global.

The Court held that mere possession of a TRC does not bar an enquiry into whether an entity is a conduit, and the revenue department had established an impermissible avoidance arrangement.

It also ruled that the amendments to the India-Mauritius DTAA were intended to curb treaty abuse. PTI JD CS BAL BAL