Tiger Global Ruling Redefines TRC Protection, GAAR and Treaty Anti-Avoidance Framework

Revisiting Treaty Certainty: Reading Tiger Global Through PPT, GAAR and Judicial Anti-Avoidance

Summary: The Supreme Court’s decision in Authority for Advance Rulings (Income Tax) and Others v. Tiger Global International II Holdings materially affects the relationship between Tax Residency Certificates (TRCs), treaty entitlement and anti-avoidance scrutiny, without rendering TRCs irrelevant. A TRC continues to be an important statutory condition under Section 90(4), but the Court held that it is an eligibility condition rather than conclusive evidence insulating an arrangement from further inquiry. The decision also examined the India-Mauritius DTAA, Article 13, indirect transfer of shares, GAAR and the grandfathering provisions of Rule 10U. Importantly, the Supreme Court interpreted the pre-amendment Rule 10U as permitting GAAR scrutiny of certain post-1 April 2017 tax benefits arising from arrangements involving earlier investments. The regulatory position subsequently changed when CBDT, through Notification No. 54/2026 dated 31 March 2026, expressly protected income from transfers of investments made before 1 April 2017 from Chapter X-A. The judgment must also be read by distinguishing treaty-based Principal Purpose Test (PPT), statutory GAAR and judicial anti-avoidance principles. For cross-border M&A and private equity transactions, the practical consequence is greater emphasis on evidence of genuine governance, decision-making, treaty entitlement and allocation of tax risk rather than reliance upon the TRC alone.

Introduction

For years, the Tax Residency Certificate (‘TRC’) has been an important part of India’s treaty-tax framework, particularly for investment structures involving Mauritius. The Supreme Court’s decision in The Authority for Advance Rulings (Income Tax) and Others v Tiger Global International II Holdings has, however, changed how much legal weight can be placed on that certificate. It would be an overstatement to describe Tiger Global as the “demise” of the TRC. The more important point is narrower and more significant. A TRC remains an important statutory requirement for claiming treaty benefits, but it does not, by itself, place the underlying arrangement beyond anti-avoidance scrutiny.

From Azadi Bachao to Vodafone: The Foundation of Treaty Certainty

The earlier position is best understood through Union of India v Azadi Bachao Andolan. In that case, the Supreme Court upheld CBDT Circular No. 789 of 2000, under which a valid Mauritian TRC was treated as sufficient evidence of residence and beneficial ownership for the purposes of the India-Mauritius DTAA as it then stood. The Court also rejected the argument that treaty shopping was, simply because it resulted in a tax advantage, necessarily unlawful. That conclusion reflected the statutory and treaty framework that existed at the time.

The Supreme Court later considered the taxation of complex offshore structures in Vodafone International Holdings BV v Union of India.^[1] The Court endorsed a holistic “look at” approach, cautioning against dissecting a genuine transaction into individual steps merely because its overall tax consequence was favourable. At the same time, Vodafone did not create immunity for sham or colourable arrangements. The Court recognised that corporate form could, in an appropriate case, be disregarded where the structure did not reflect the reality of the transaction.

The statutory framework subsequently changed. Section 90(2A) gave GAAR an independent statutory footing notwithstanding treaty benefits. Section 90(4) made possession of a foreign-residence certificate a condition for claiming treaty relief, while section 90(5) permitted additional prescribed information to be required.^[2] Tiger Global therefore arose against a statutory backdrop that was materially different from the one considered in Azadi Bachao.

Tiger Global: TRC Is an Eligibility Condition, Not an Immunity Shield

The dispute concerned three Mauritius-incorporated companies: Tiger Global International II, III and IV Holdings. Between 2011 and 2015, they acquired shares in a Singapore-incorporated Flipkart company and later sold part of their holdings in 2018 in connection with Walmart’s acquisition of Flipkart. On paper, the entities had several indicators of Mauritian substance. They had two Mauritian-resident directors, a US-resident director, a Mauritian office, two employees, local bank accounts and accounting records, audited financial statements, Category I Global Business Licences and valid TRCs.

The Revenue nevertheless questioned how much of the substantive investment and exit decision-making actually took place in Mauritius. The AAR rejected the companies’ applications under the proviso to section 245R(2), principally on the basis that the transactions appeared, prima facie, to have been designed for the avoidance of income tax. The Delhi High Court reversed that conclusion in 2024. On 15 January 2026, the Supreme Court allowed the Revenue’s appeals and restored the AAR’s decision.

The Court’s treatment of the TRC is at the heart of the decision. It held that section 90(4) makes the TRC an “eligibility condition”; it does not make the certificate conclusive evidence that prevents any further statutory inquiry.

That point needs to be kept in proportion. Tiger Global did not abolish the TRC, nor did the Court establish a universal physical-substance test under which every offshore investment vehicle must maintain a particular number of employees, offices or independent revenue streams. The dispute was instead concerned with the relationship between formal corporate presence and the actual exercise of decision-making power. The AAR’s findings focused on where effective control over significant investment decisions lay and concluded that the “head and brain” of the entities was outside Mauritius.

The case is therefore better understood as one concerning substance of control, rather than as the introduction of a checklist for establishing treaty residence.

The Article 13 Problem: Why Grandfathering Was Not the Whole Answer

The treaty analysis also cannot be reduced to the proposition that an investment made before 1 April 2017 is automatically protected.

The 2016 Protocol to the India-Mauritius DTAA significantly changed the capital-gains regime. It introduced source-based taxation for qualifying shares acquired on or after 1 April 2017, while preserving protection for qualifying investments made before that date. Article 13(4) continued to operate as the residuary provision for gains arising from property not covered by the preceding paragraphs.

The difficulty in Tiger Global was that the shares sold by the Mauritian entities were shares in a Singapore company, rather than shares directly in an Indian company. The Supreme Court’s analysis treated the nature and situs of the property transferred as relevant to the application of Article 13. It did not accept that an indirect share transfer could simply be brought within the protection claimed under Article 13(4).

In other words, the proposition that “pre-2017 investment equals treaty exemption” was never enough on its own. The Court considered the particular treaty provision relied upon, the legal structure of the transaction and the domestic anti-avoidance framework together.

The Rule 10U Controversy and the March 2026 Response

The most consequential part of the judgment concerns the interaction between GAAR and grandfathering.

Before 31 March 2026, Rule 10U(1)(d) excluded income arising from the transfer of investments made before 1 April 2017 from Chapter X-A. Rule 10U(2), however, stated that Chapter X-A could apply to an arrangement irrespective of when it was entered into where the tax benefit from that arrangement was obtained on or after 1 April 2017.^[3]

The Supreme Court read the two provisions together and held that the protection in Rule 10U(1)(d) did not prevent GAAR from applying where a tax benefit arising from the relevant arrangement was obtained after 1 April 2017. In reaching that conclusion, the Court placed particular emphasis on the words “without prejudice” and distinguished the original investment from the later arrangement that generated the tax benefit. In Tiger Global, the proposal for the sale had emerged only in 2018.

This interpretation created uncertainty around legacy investments. But the legal position did not end with the Supreme Court’s judgment.

CBDT Amendment to Rule 10U

On 31 March 2026, the CBDT amended Rule 10U through Notification No. 54/2026. The amended rule expressly preserves the exclusion from Chapter X-A for income arising from the transfer of investments made before 1 April 2017, even where the relevant arrangement might otherwise fall within the temporal scope of the GAAR provisions. A corresponding amendment was made to Rule 128 of the Income-tax Rules, 2026 through Notification No. 55/2026, with effect from 1 April 2026.

The position, therefore, is more nuanced than saying that Tiger Global destroyed grandfathering. The Supreme Court interpreted the pre-amendment version of Rule 10U in a way that exposed certain post-2017 tax benefits arising from legacy arrangements to GAAR scrutiny. The CBDT subsequently amended the rule to expressly protect income arising from transfers of investments made before 1 April 2017.

Whether that amendment should operate retrospectively in disputes that had already been decided under the earlier rule is a separate legal question and cannot simply be assumed from the fact of the amendment.

PPT, GAAR and JAAR: Three Different Questions

It is equally important to keep the different anti-abuse mechanisms involved in the case separate.

CBDT Circular No. 1/2025 addresses the Principal Purpose Test (‘PPT’) contained in India’s tax treaties. It clarified that the PPT applies prospectively and that treaty grandfathering for qualifying pre-1 April 2017 investments remains outside its scope. But the PPT should not be treated as interchangeable with India’s domestic GAAR.

The distinction can be put simply:

PPT is treaty-based. GAAR is statutory. JAAR is judicial.

Compliance with the PPT does not automatically establish immunity from domestic GAAR. Likewise, possession of a TRC does not prevent a judicial inquiry into whether the structure is abusive.

That does not mean, however, that Tiger Global gives the Revenue unlimited power to disregard offshore companies. The Court recognised that anti-avoidance principles cannot be invoked merely because an investor has selected a tax-efficient structure. There must be a factual basis for the finding of abuse before substance-over-form reasoning or veil-piercing principles can properly be invoked.

The more accurate proposition emerging from Tiger Global is therefore not that “substance always defeats form”. It is that formal legal structure cannot, by itself, defeat an anti-avoidance case that is supported by the facts and the governing law.

What Tiger Global Means for Cross-Border M&A and Private Equity

For dealmakers, the immediate consequence is less about complying with a new statutory checklist and more about the quality of the evidence supporting an offshore structure. A TRC should no longer be treated as the end of tax diligence where treaty entitlement could later be challenged.

Evidentiary Diligence

Historical board minutes, investment-committee approvals, authority matrices, transaction correspondence, banking records and other evidence of actual decision-making may become important in establishing how an offshore entity was operated.

Substantive Governance

The relevant question is not simply whether directors or an office exist in the jurisdiction, but whether the directors actually exercised the powers attributed to them, particularly in relation to acquisitions, follow-on investments and exits. Local directors and a local office may support the position, but their existence alone is not decisive.

SPA Drafting and Tax Indemnities

Buyers and sellers may need more carefully drafted representations concerning treaty eligibility, tax residence, historical governance and compliance. Where material uncertainty remains, specific tax indemnities and appropriately structured escrow or holdback arrangements may assume greater importance.

Withholding and Transaction Execution

Where the transaction depends on treaty protection, the parties should address in advance who bears the risk of a withholding obligation or a subsequent denial of treaty benefits. Relying on the production of a TRC alone may leave an important part of that risk unaddressed.

These should not be mistaken for statutory “Tiger Global requirements”. They are practical implications of a judgment that places greater importance on the factual record behind an offshore structure.

Conclusion

Tiger Global is better understood as a redefinition, rather than an abolition, of the TRC’s role. The certificate remains an important statutory condition for claiming treaty benefits, but it does not prevent an inquiry into the substance and purpose of the arrangement through which those benefits are claimed.

The judgment is also more complicated than a simple “form versus substance” narrative suggests. Its treatment of the treaty text, Article 13, GAAR, judicial anti-avoidance principles and the factual circumstances surrounding the Mauritian entities shows that each part of the analysis serves a different legal function.

Most importantly, the story did not end with the Supreme Court’s judgment on 15 January 2026. The CBDT’s amendment of Rule 10U on 31 March 2026 materially changed the position concerning GAAR grandfathering for investments made before 1 April 2017. The post-Tiger Global landscape is therefore not one in which every historical treaty protection has disappeared. Rather, treaty residence, treaty entitlement, anti-avoidance and grandfathering now need to be considered as distinct questions before being read together.

For cross-border investors and M&A counsel, the practical lesson is a precise one i.e., a TRC still opens the treaty door, but it no longer closes the inquiry behind it.

[1] Vodafone International Holdings BV v. Union of India, (2012) 341 ITR 1 (SC).

[2] The Income Tax Act, No. 43 of 1961, § 90(2A), § 90(4), § 90(5).

[3] Income Tax Rules 1962, r 10U(1)(d), r 10U(2) (pre-amendment). The Companies (Incorporation) Rules, 2014, GAZETTE OF INDIA, pt. II sec. 3(i) (Mar. 31, 2014).