In the aftermath of the Supreme Court's ruling in favour of the Income Tax Department in the high-profile Tiger Global case, the Central Board of Direct Taxes (CBDT) has sought to calm investor concerns by clearly stating that old cases will not be reopened.
Responding to queries on whether the verdict could trigger reassessment of past transactions routed through jurisdictions such as Mauritius or Singapore, senior CBDT sources categorically said, "No, it would not." The clarification comes amid widespread anxiety among foreign investors and Indian companies that the ruling could lead to heightened scrutiny of historical IPOs, mergers and acquisitions (M&As) and offshore investment structures.
Also Read: Supreme Court Denies Treaty Benefits to Tiger Global in Flipkart Capital Gains Tax Case
Supreme Court Overturns Delhi High Court Ruling
On Thursday, the Supreme Court set aside the Delhi High Court's earlier judgment that had quashed the tax demand raised on Tiger Global. The apex court held that capital gains arising from the sale of a $1.6 billion stake were taxable in India, after concluding that the transaction constituted an impermissible tax avoidance arrangement.
A division bench comprising Justices J.B. Pardiwala and R. Mahadevan observed that once it is factually established that unlisted equity shares were transferred pursuant to an arrangement not permissible under law, the assessees cannot claim exemption under Article 13(4) of the India-Mauritius Double Taxation Avoidance Agreement (DTAA).
"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 bench ruled, holding that the High Court judgment deserved to be set aside.
GAAR Overrides Treaty Protection in Abuse Cases
Decoding the judgment, Rajan Sachdev, Partner at Nangia Global, pointed out that the Delhi High Court had earlier ruled in favour of the assessees on the basis of valid Tax Residency Certificates (TRCs), satisfaction of Limitation of Benefits (LOB) conditions and grandfathering provisions under the India-Mauritius DTAA, in the absence of proven fraud.
However, the Supreme Court took a sharply different view after a detailed examination of the DTAA, CBDT Circulars 682 and 789, and landmark rulings such as Azadi Bachao Andolan and Vodafone. The Court also analysed GAAR provisions, the Finance Act, 2013 and the 2017 treaty amendments, holding that these changes were specifically introduced to curb treaty abuse and round-tripping.
Importantly, the Court ruled that mere possession of a TRC does not bar enquiry where an interposed entity functions only as a conduit for tax avoidance. It further held that CBDT circulars cannot override statutory amendments reflecting legislative intent.
"Crucially, GAAR was held to apply to any arrangement yielding tax benefits on or after 1 April 2017, irrespective of when the investment was originally made," Sachdev said.
Investor Concerns Addressed, But Caution Ahead
While tax experts believe the ruling may prompt foreign investors to reconsider structures routed through traditionally tax-friendly jurisdictions such as Mauritius, Cayman Islands or Cyprus, the CBDT's assurance that past cases will not be reopened offers significant relief.
According to a tax expert, although the verdict could lead to closer scrutiny of future cross-border deals, it also signals a shift towards substance-based investment structures, including those operating out of GIFT City.
For now, the government's clarification appears aimed at striking a balance, upholding the law against abusive arrangements while maintaining investor confidence by drawing a clear line against reopening settled past transactions.
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