Foreign investors and private equity firms in India are seeking urgent legal advice after a recent Supreme Court ruling expanded the government’s authority in tax disputes, raising concerns about greater scrutiny of past and future deals.
On 15 January, India’s Supreme Court ruled that US investment firm Tiger Global is liable to pay tax in India on profits from its 2018 sale of a stake in e-commerce company Flipkart to Walmart. The decision overturned a 2024 Delhi High Court ruling that had allowed Tiger Global to claim tax exemption under the India–Mauritius tax treaty.
In its detailed judgment, the top court adopted a stricter interpretation of tax treaties. It said authorities can deny treaty benefits if offshore investment structures are found to lack real commercial substance, even when companies have valid paperwork in place. Legal experts say the ruling gives tax authorities broad powers to examine offshore transactions linked to Indian assets.
The decision has unsettled foreign investors, with some lawyers telling the BBC that clients fear previously closed transactions could now face renewed scrutiny. There are concerns that the ruling could weaken policy certainty and damage investor confidence.
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