Foreign investors and offshore funds often face scrutiny when claiming tax treaty benefits in India. A recent Delhi High Court ruling in the case of Tiger Global International II Holding provided significant relief by upholding tax treaty benefits under the India-Mauritius Tax Treaty.

The India-Mauritius tax treaty offers beneficial tax treatment with respect to various streams of income including capital gains tax exemption for Mauritius-based investors on sale of shares in a foreign company. However, Indian tax authorities regularly assess whether these investments genuinely qualify for tax exemptions, scrutinising issues like beneficial ownership and control. In 2018, Tiger Global sold shares of Flipkart Singapore to Walmart International Holdings Inc. As a tax resident of Mauritius with a tax residency certificate (TRC) issued by the Mauritian tax authorities, Tiger Global claimed an exemption from capital gains tax in India on the sale of shares of Flipkart.

However, Indian tax authorities and the Authority of Advance Ruling (AAR) denied the benefits to Tiger Global, alleging that Tiger Global was merely a sham or conduit entity, and that it was controlled by Tiger Global Management LLC (TGM LLC), based in the United States.