Re. Tiger Global International II Holdings, Mauritius & Ors (Authority for Advance Rulings New Delhi)
Facts:
♠ Tiger Global International (II, III, IV) were the applicants, the Mauritius based companies which holds several shares in the Flipkart Private Limited, the Singapore based Company, the company which derive its substantial value from the assets located in the India.
♠ The Mauritius based companies had made investments in the Flipkart (Singapore) in various tranches during the period from Oct-2011 to Apr-2015, therefore, these companies were eligible to get benefit of grandfathering clause as per amended DTAA between India & Mauritius.
♠ On 18.08.2018 all the three applicants transferred certain shares of Singapore Co. to Fit Holdings S.A.R.L. (Buyer), a company incorporated under the laws of Luxembourg. These transfers were undertaken as part of a broader transaction involving the majority acquisition of Singapore Co. by Walmart Inc., a company incorporated in the United States of America, from several shareholders, including the applicants.
♠ The applicants had approached the Indian tax authorities under section 197 of the Act on 02-08-2018 seeking a certification of nil withholding prior to consummation of the transfer. The tax authorities had informed vide communication dated 17-08-2018 that the applicants were not eligible to avail benefit under the Indo-Mauritius Tax Treaty as the applicants were not independent in their decision making and the control over the decision making of the purchase and sale of the shares did not lie with them. The tax authorities had passed an order under section 197 of the Act on 17-08-2018 and prescribed the income tax rate ranging from 6% to 8.5%.
♠ Thereafter, the applicants’ approach before the AAR on 19-02-2019 and raised following question;
Whether, on the facts and in the circumstances of the case, gains arising to the Applicants (a private company incorporated in Mauritius) from the sale of shares held by the Applicants in Flipkart Private Limited (a private company incorporated in Singapore) to Fit Holdings S.A.R.L. (a company incorporated in Luxembourg) would be chargeable to tax in India under the Income-tax Act, 1961 read with the Double Taxation Avoidance Agreement between India and Mauritius?
♠ Beside the other issues, the main issue before the AAR was Whether transaction / issue designed prima facie for avoidance of tax?
Revenue’s Submission
The Revenue submitted that the following facts discovered during the course of 197 proceedings indicated that the scheme was designed prima facie for avoidance of tax.
(a) Ownership Structure & Control: The Revenue has submitted that as per Notes to the Financial Statement of the year ending 31.12.2011, the applicants were held by the Tiger Global Management LLC, a USA based investment entity that invests in public and private markets across the world through a web of entities based out of low tax jurisdictions in Cayman Islands and Mauritius, which indicated that the real control of the Company does not lie within Mauritius.
(b) Decision Making: On the basis of the Minutes of the Meeting furnished by the applicants, the Revenue submitted that Mr. Steven Boyd, non-resident USA Director (who was also General Counsel of Tiger Global Management LLC) had attended all the Board meetings in which crucial decisions were taken and that the Mauritius Directors were in effect mere spectators or took advice from Mr. Steven Boyd.
(c) Financial Control: From the evidences brought on record by the Revenue, it was evident that the funds of the applicants were ultimately controlled by Mr. Charles P. Coleman and the applicants had only a limited control over their fund. Apparently, the decision for investment or sale was taken by the Board of Directors of the applicants but the real control over the decision of any transaction over USD 2,50,000 was exercised by Mr. Charles P. Coleman only.
(d) Beneficial ownership: On bare perusal of the documents submitted by Tiger Global International III Holdings with Mauritius Financial services commission for the purpose of obtaining Category 1 Global Business License, it is found that the applicants itself has clearly specified the BENEFICIAL OWNER OF THE COMPANY AS MR. CHARLES P COLEMAN. IT IS PERTINENT TO NOTE THAT MR. CHARLES P COLEMAN IS THE FOUNDER AND PARTNER OF TIGER GLOBAL MANAGEMENT LLS, USA.
AAR Findings
