Mint Explainer: What Justice Pardiwala’s sovereignty note in the Tiger Global case means for India’s tax treaties

A bench comprising Justices R. Mahadevan and J.B. Pardiwala accepted the tax department’s argument that Tiger Global had used Mauritius primarily as a conduit to claim treaty benefits, with real control and decision-making resting in the US.

While the main judgment was authored by Justice Mahadevan, Justice Pardiwala wrote a separate concurring opinion that went beyond the facts of the case and stressed the importance of national sovereignty in international taxation.

Justice Pardiwala, who was appointed to the Supreme Court in May 2022 from the Gujarat high court, is slated to take over as the Chief Justice of India in May 2028 and will serve until his retirement on 11 August 2030, giving him a tenure of over two years, one of the longest among the current line-up of judges.

He has authored more than 300 judgments so far and has recently made headlines for key rulings, including those on the relocation of stray dogs in the National Capital Region and for fixing timelines for governors and the President to grant assent to state Bills.

Mint explains Justice Pardiwala's stand.

What is the Tiger Global-Flipkart case?

The case relates to Walmart Inc.’s 2018 purchase of about 77% of Flipkart for around $16 billion. Tiger Global, one of Flipkart’s early investors, sold part of its stake in this deal, reportedly for about $1.6 billion. However, court records showed that its three Mauritius-based companies together received around ₹14,440 crore.

The investment firm invested in Flipkart between 2011 and 2015 through Mauritian entities and claimed the profits were tax-free under the India–Mauritius Double Taxation Avoidance Agreement, because the investments were made before 1 April 2017. The tax department argued that these Mauritius firms were used only as a conduit and that the real control was in the US.

Tiger Global first approached the Authority for Advance Rulings (AAR), which in 2021 rejected its claim, finding the structure appeared to be tax avoidance. The Delhi high court later gave relief to the global investor in 2024. The tax department then appealed to the Supreme Court.

What did the Supreme Court rule?

In a judgment written by Justice R. Mahadevan, the top court ruled that Tiger Global is liable to pay capital gains tax in India.

It set aside the Delhi high court ruling and held that the Mauritian companies were only conduit entities with no real business substance and that the real decision-making was in the US.

The court said a Tax Residency Certificate is not a “magic wand" that automatically gives treaty benefits. Authorities can examine who actually controls the company and whether the structure was created primarily to save on taxes.

Referring to the 2016 amendment to the India-Mauritius tax treaty and the introduction of the General Anti-Avoidance Rule (GAAR) from 1 April 2017, the court said these changes were intended to curb treaty shopping, round-tripping, and the use of shell companies.

Even investments made before the cut-off date, the court said, can be examined if the arrangement is mainly for tax benefit and lacks real economic substance.

What did Justice Pardiwala say in his separate note?

In his concurring opinion, Justice Pardiwala placed the case in a larger national and global context. He said taxation is a core part of national sovereignty, and a country’s strength depends on its ability to tax income arising from its own soil. Today, he said, threats to sovereignty are not only military but also economic.

“Taxing an income arising out of its own country is an inherent sovereign right. Any dilution of this is a threat to a nation’s long-term interest," he observed.

He said tax treaties are meant to avoid double taxation, not to allow income to escape tax altogether through shell or routing companies. Economic independence, he added, is as important as political independence, and giving up taxing rights in the name of investment can harm national interest.

He also warned against allowing external pressures, multinational corporations or international bodies to influence domestic tax policy choices.

Emphasising a dynamic, substance-over-form approach, he noted that with rapidly changing global trade patterns, treaty interpretation must remain context-sensitive and forward-looking.

“When current trade affairs are so dynamic, a contextual and meaningful interpretation of such instruments would not only make it currently relevant, but also vibrant, matching with the progressive global business dynamics," he said, adding that outdated or overly rigid readings that undermine a nation’s taxing rights should be avoided.

What safeguards did Justice Pardiwala suggest for future treaties?

• Limitation of Benefits (LOB) clauses to stop treaty shopping

• GAAR override to deny benefits to tax-avoidance structures

• Taxing the digital economy through “significant economic presence"

• Strong source-based taxation rights for capital gains, royalties, interest, and business profits

• Tax credit instead of a full exemption to avoid double non-taxation

• Exit and renegotiation clauses in treaties

• Avoiding Most Favoured Nation (MFN) clauses

• Clear Permanent Establishment rules

• Alignment with the Constitution and domestic tax law

• Proper cost–benefit analysis before signing treaties

• Regular review of treaties

Why does Justice Pardiwala’s opinion matter?

His separate note could shape how courts interpret tax treaties going forward, according to lawyers.

“Justice Pardiwala’s separate opinion offers important guidance for India’s future tax treaty negotiations and renegotiations. He supports a framework that prioritizes source-based taxation, strong LOB clauses and allows anti-avoidance rules to override abusive claims," said Alay Razvi, managing partner at Accord Juris.

For foreign investors, private equity, and venture capital funds, the ruling and the concurring opinion together signal a tougher, substance-based approach and a stronger assertion of India’s tax sovereignty in cross-border deals.