Foreign investors and private equity firms operating in India are making anxious calls to advisers and lawyers after a Supreme Court ruling earlier this month strengthened the government's hand in tax disputes.
On 15 January, India's top court ruled that US investment firm Tiger Global must pay tax in India on the sale of its stake in e-commerce giant Flipkart to Walmart in 2018. The 152-page judgment overturned a 2024 Delhi high court decision that had allowed Tiger Global to claim tax relief under a decades-old India–Mauritius tax treaty.
The ruling, which could reshape how foreign investors exit their Indian investments, sets out a tougher interpretation of tax treaties. It allows authorities to deny treaty benefits if offshore investment structures are deemed to be sham entities with little commercial substance - even when investors hold valid documentation.
The judgement gives India wide powers to scrutinise any offshore corporate deal. But experts warn it could unsettle international investors and hurt business sentiment.
Some lawyers who wanted to remain unnamed told the BBC that their clients were worried that the ruling could lead to scrutiny of old transactions and share sales long thought to be settled.
