In a move aimed at preserving investor confidence and ensuring certainty in tax administration, the Central Board of Direct Taxes (CBDT) has made it clear that it will not reopen completed or past assessment cases following the recent Supreme Court verdict in the Tiger Global matter. The clarification comes amid concerns in business and investment circles that the judgment could trigger retrospective scrutiny of cross-border transactions routed through treaty jurisdictions.
The Supreme Court’s ruling had upheld the Income Tax Department’s stand in the case involving Tiger Global, particularly in relation to capital gains arising from its exit from Flipkart during Walmart’s acquisition in 2018. While the verdict went in favour of the tax authorities on the merits of the case, the CBDT has emphasised that the decision will not be used as a basis to revisit concluded assessments of other taxpayers.
Investor reassurance and policy continuity
The intent behind the clarification is to reassure foreign and domestic investors that India’s tax regime will not resort to retrospective action merely because of a favourable judicial precedent. According to CBDT sources, the ruling will apply only to pending or live proceedings where assessments were stayed and are yet to be finalised.
Businesses had expressed apprehension that the judgment could lead to enhanced scrutiny of past transactions structured through jurisdictions such as Mauritius or Singapore, especially in the context of mergers, acquisitions, and initial public offerings. The CBDT’s position seeks to allay these fears by underlining that finalised cases will remain undisturbed.
What the Supreme Court held
In its detailed judgment, the Supreme Court clarified several important aspects of treaty interpretation and tax avoidance:
- Merely holding a Tax Residency Certificate (TRC) does not automatically bar the tax authorities from examining whether an entity is a genuine investor or merely a conduit.
- Amendments to the India–Mauritius Double Taxation Avoidance Agreement (DTAA) were intended to prevent treaty abuse and cannot be ignored where facts suggest impermissible avoidance.
- In Tiger Global’s case, the Income Tax Department was justified in alleging an impermissible tax avoidance arrangement based on the structure and substance of the transaction.
As a result of the ruling, assessments for Assessment Year 2020–21, which had remained stayed, are now set to resume. Tax officials will proceed to complete these assessments in line with the Supreme Court’s findings.
Financial implications for Tiger Global
According to official estimates, the total tax amount withheld across three Tiger Global entities stands at approximately ₹967.52 crore. This amount, already withheld under Section 241A of the Income-tax Act, will now be adjusted against the final tax demand that emerges from the completed assessment proceedings.
Tiger Global had maintained that the capital gains arising from its investments were protected under the grandfathering provisions of the DTAA and therefore not taxable in India. However, the Supreme Court rejected this contention in the specific factual matrix of the case.
No ‘tax terrorism’, say officials
Responding to criticism that large tax demands in high-value transactions amount to “tax overreach” or “tax terrorism”, officials and experts have pushed back against such characterisations. They argue that in transactions involving thousands of crores, tax figures will naturally appear substantial and must be viewed in proportion to the size of the deal.
Officials also noted that pending demands or temporary withholding of refunds should not automatically be seen as coercive. Such measures often reflect unresolved questions of law that await final judicial determination. Until such clarity emerges, both taxpayers and the tax administration remain bound by due process.
Limited scope for reopening cases
While tax experts acknowledge that certain ongoing or unresolved cases may still be influenced by the principles laid down in the judgment, they agree that the CBDT’s stance significantly limits the scope for reopening old matters. Potential impact cases may involve complex structures where treaty abuse is alleged, but only where assessments are still open or legally permissible to revisit.
Overall, the CBDT’s clarification signals an attempt to balance robust tax enforcement with predictability and fairness, reinforcing India’s commitment to a stable and non-retrospective tax regime even while addressing aggressive tax planning in cross-border transactions.
