Poking the Tiger: The Supreme Court Rewrites India’s Treaty Entitlement Rules

This article examines the Supreme Court’s decision in Tiger Global and its implications for the interaction between treaty entitlements, grandfathering provisions, and India’s General Anti-Avoidance Rule [“GAAR”]. It argues that the judgment of the court marks a doctrinal shift from a reliance on treaty entitlement to a substance over form approach. In doing so, the Court reframes grandfathering clause not as guarantees but as rebuttable presumptions subject to the anti-abuse provisions.

Facts of the case

Tiger Global International II, III, and IV Holdings, Mauritius-incorporated funds [“Tiger Global Entities”] holding Category-1 Global Business Licenses and Tax Residency Certificates [“TRCs”], owned shares of Flipkart Singapore, a holding company whose value derived largely from its Indian subsidiaries. In 2018, these Mauritius entities sold their Flipkart Singapore shares to Fit Holdings S.A.R.L. (Luxembourg) as part of Walmart’s acquisition of Flipkart.

Under the original 1982 India-Mauritius DTAA, capital gains arising from the sale of shares of Indian companies were taxable only in the state of residence, Mauritius, effectively exempting such gains from taxation in India. The 2016 Protocol, effective from 1 April 2017, amended this rule by granting India the right to tax such gains for shares acquired after that date. However, investments made before 1 April 2017 were explicitly grandfathered, meaning that the earlier exemption continued to apply to them.

India’s General Anti-Avoidance Rule [“GAAR”], introduced in the Income-tax Act in 2012, is designed to deny tax benefits arising from arrangements whose main purpose is to obtain a tax advantage and which lack commercial substance. Its implementation was deferred until 1 April 2017. Rule 10U of the Income-tax Rules provides that GAAR shall not apply to income arising from investments made before 1 April 2017, thereby protecting prima-facie legitimate pre-2017 investments from retrospective anti-avoidance scrutiny.

Tiger Global sought a no tax withholding certificate from Indian authorities. The authorities refused and the Tiger Global Entities applied to the Authority for Advance Rulings [“AAR”] in 2020. The AAR found the transaction to be prima facie designed for the avoidance of income tax, noting the Mauritius companies lacked substance and the control was effectively in the US. It dismissed their application as not maintainable under Section 245R(2)(iii) of the Income-Tax Act (the GAAR threshold rule).

On appeal, the Delhi High Court in August 2024 set aside the AAR holding and held the Mauritius funds entitled to treaty relief. The High Court treated the TRCs as conclusive evidence of residence and applied the grandfathering clause, rejecting GAAR on the grounds the investments pre‑dated April 2017. It viewed the structure as a bona fide investment exit and held treaty benefits could not be denied in absence of manifest sham or fraud.

The Supreme Court unanimously reversed the Delhi High Court on 15 January 2026. It agreed with the AAR that Tiger Global’s corporate structure was an impermissible avoidance arrangement. The Court held that, despite the grandfathering rule, the Mauritius holding companies lacked genuine substance, so their Flipkart gains were taxable in India. It emphasized that holding a TRC is a necessary condition but is not sufficient for treaty benefits. In short, the Supreme Court denied Tiger Global the treaty benefits under the India-Mauritius DTAA.

Effect on the status Quo

The Tiger Global judgment changes the position of law vis-à-vis India’s treaty entitlement. Previously, a valid TRC was treated as conclusive evidence of residence and entitled the holder to treaty benefits. Likewise, the 2016 Protocol and Rule 10U were understood to grandfather all genuine pre‑2017 investments, immunizing them from GAAR. Tiger Global rejects these certainties. The Court held that TRCs alone do not bind the authorities: tax officials may “look behind” a certificate and probe an entity’s substance. Even for grandfathered holdings, treaty benefits now turn on substance.

This shift embodies a movement from formal compliance to a substance-over-form approach. The Supreme Court emphasised that the India- Mauritius DTAA exists to avoid double taxation, not to facilitate tax avoidance. It affirmed that shell/conduit entities will not be entitled to treaty benefits. The court emphasised that the treaty benefits depends on the economic and commercial substance beyond the TRC.

The Delhi ITAT in Hareon Solar Singapore Pvt. Ltd. v. DCIT recently passed an order implementing tiger global citing lack of commercial substance and applying the limitation of benefits clause to deny treaty benefits.

Grandfathering as Legitimate Expectation?

Before Tiger Global, foreign investors had a legitimate expectation the India government will apply the treaty benefits and grandfathering guarantees for pre‑2017 exits. The 2016 Protocol to the India-Mauritius DTAA and official guidance explicitly assured that “investments made before 1.4.2017…will not be subject to capital gains taxation in India”.  Such public assurances and treaty terms created an expectation of tax certainty. Typically, such expectations protect parties against abrupt legal shifts absent compelling public interest. But the Supreme Court in Tiger Global has reframed grandfathering not as an inviolable right, but as a presumption subject to rebuttal.

The Supreme Court’s ruling clarifies that Rule 10U’s grandfathering provision does not provide protection against allegations of treaty abuse. Taxpayers invoking grandfathering must substantiate the commercial substance of their corporate structure. Where the Revenue establishes that a structure is prima facie tax-driven, as in Tiger Global, the exemption is rendered inoperative. Grandfathering, in this schema, functions not as a guarantee but as a rebuttable presumption.

Treaty Obligations and Anti-Avoidance

This interpretive shift furthers the tension between India’s invocation of GAAR principles and its international obligations. Under Article 26 of the Vienna Convention on the Law of Treaties, states are required to perform treaties in good faith (‘pacta sunt servanda’), while Article 31 requires treaties to be interpreted in light of their object and purpose.

Tiger Global permits domestic anti-avoidance norms to become a part of treaty interpretation and application, despite the absence of an express override clause in the DTAA. By reading GAAR’s purpose into the treaty context, the Court reinforces India’s sovereign taxing rights, especially against shell or conduit arrangements.

The approach arguably recasts treaty commitments as conditional upon substantive compliance, thereby weakening reliance interests. In effect, Tiger Global renders the doctrine of legitimate expectation contingent on the outcome of a substance test, thereby subordinating formal assurances to India’s anti-abuse framework.

In effect, Tiger Global transforms the doctrine of legitimate expectation when it comes to treaty entitlement and the ultimate enforceability of the treaty depends on whether a particular structure can withhold the test of a substance based scrutiny over mere form.