[Opinion] GAAR Grandfathering Restored—But Tiger Global’s Sting Endures

CA Paras K Savla – [2026] 185 taxmann.com 152 (Article)

1. Executive Summary

On 15 January 2026, the Supreme Court of India1 upheld a capital gains tax demand of approximately Rs. 14,500 crore on Tiger Global’s exit from Flipkart, applying GAAR to a pre-2017 investment structure and fundamentally recalibrating India’s treaty-benefit jurisprudence. The CBDT issued Notifications 54 and 55 of 2026 on 31 March 2026, amending Rule 10U (IT Rules, 1962) and Rule 128 (IT Rules, 2026) to exclude income from the transfer of pre-2017 investments from GAAR’s reach.

The amendment has generated two sharply divergent readings in professional discourse. One school reads it as a legislative reversal of Tiger Global on the GAAR question. The other reads it as a codification of the very distinction the Supreme Court drew—between protected “investments” and challengeable “arrangements”—leaving the ruling’s core ratio firmly intact. This article examines both views, the textual puzzle they reveal, and what endures regardless of how the amendment is ultimately read.

2. The Supreme Court’s Ruling in Tiger Global—A Structural Brief

2.1 The Structure and the Dispute

Tiger Global held its Flipkart stake through a layered structure: Mauritius-incorporated holding entities (Tiger Global International II, III and IV Holdings) owned Singapore-incorporated intermediate companies, which in turn held shares in Flipkart India. The investments were assembled before April 1, 2017 i.e., before GAAR came into force. In 2018, when Walmart acquired Flipkart for approximately USD 16 billion, the Mauritius entities received aggregate consideration exceeding Rs. 14,500 crore on the transfer of their Singapore interests.

The Mauritius entities claimed capital gains exemption under Article 13(4) of the India-Mauritius DTAA, relying on Tax Residency Certificates (TRCs) and the grandfathering protection under Rule 10U(1)(d). The Authority for Advance Rulings ruled against Tiger Global in 2020. The Delhi High Court reversed in August 2024. The Supreme Court, on 15 January 2026, reversed the High Court and upheld the tax demand.

2.2 The Court’s Five Core Holdings

Sr.No	Holding	Significance
1	TRC not conclusive	A Tax Residency Certificate creates a rebuttable presumption, not an inviolable shield. It establishes eligibility to claim a treaty, not entitlement to its benefits regardless of substance.
2	CBDT Circulars 682 & 789 superseded	Circulars validating TRC-based treaty protection were superseded by the Finance Act 2013 and the 2016 India-Mauritius DTAA amendments. Circulars cannot override statutory intent.
3	GAAR reaches post-2017 tax benefits on pre-2017 investments	Rule 10U(2), framed “without prejudice” to the grandfathering clause, enabled GAAR to apply where a tax benefit was obtained on or after 1 April 2017, regardless of when the investment was made. The 2018 exit fell within this window.
4	Azadi Bachao & Vodafone recalibrated	These earlier rulings operated in a pre-GAAR, pre-MLI landscape. They no longer confer blanket treaty protection in the post-2017 environment.
5	Substance doctrine affirmed on facts	The Mauritius entities lacked independent commercial substance, with investment decisions and control exercised outside Mauritius. The structure was an impermissible avoidance arrangement under Chapter X-A.

Critically, the Revenue had consistently argued before the Court—as recorded in Para 45 of the judgment—that Rule 10U grandfathered only genuine “investments” made prior to 1 April 2017, and not “arrangements” or structures designed to obtain treaty benefits. The Supreme Court accepted this distinction as the correct reading of Rule 10U’s architecture. This point becomes central to understanding what the March 31 amendment actually achieves.