In a landmark decision that could redefine India's approach to taxing foreign investments, the Supreme Court recently upheld the income tax department’s claim that capital gains from Tiger Global Management Llc’s $1.6-billion exit from Flipkart in 2018 are indeed taxable in India. This ruling sets aside the Delhi High Court's August 2024 judgment, which had previously quashed the tax demand and favored Tiger Global. The pronouncement by a bench of Justices J.B. Pardiwala and R. Mahadevan is anticipated to significantly impact how India levies taxes on foreign investors and its interpretation of the crucial India-Mauritius Double Taxation Avoidance Agreement (DTAA).

At the heart of the contentious dispute was Tiger Global’s substantial $1.6-billion divestment from Flipkart in 2018, a transaction that occurred when Walmart Inc. acquired a controlling stake in the Indian e-commerce giant, marking one of India's largest cross-border deals. The central legal question revolved around whether Tiger Global could legitimately claim capital gains tax exemption under the India-Mauritius DTAA for this sale. The tax department contended that Tiger Global's Mauritius-based companies were merely