India

I. WHAT ACTUALLY HAPPENED: THE FLIPKART EXIT On 15 January 2026, the Supreme Court of India (“SC”) delivered a judgment that materially alters how offshore investment structures into India are evaluated for tax purposes (“Tiger Global Judgement”)[1]. The SC recalibrated the very foundation of treaty entitlement by holding that the possession of a Tax Residency Certificate (“TRC”), by itself, does not secure treaty protection if the structure lacks commercial and economic substance. The ruling arose from Walmart Inc’s approximately USD 16 billion acquisition of Flipkart in 2018, but its implications extend far beyond that transaction. Hitherto, it was sufficient for a non-resident investor to furnish a Tax Residency Certificate as an acceptable proof of residency in the treaty jurisdiction.  The SC held that Tiger Global, a New York based investment fund that invested in Flipkart Singapore through its Mauritius subsidiary, is liable to capital gains tax in India on its 2018 exit from Flipkart Singapore. The tax exposure potentially exceeds USD 1 billion, making this one of the most consequential international tax rulings in India’s history since Vodafone[2]. But its real significance lies not in its numbers, but in the doctrinal shift it introduces. At the centre of the dispute were three Mauritius-based investment vehicles, namely Tiger Global International II, III & IV Holdings. These entities were part of the Tiger Global group’s offshore investment platform. Between 2011 and 2015, they invested in a Singapore intermediate holding company, namely Flipkart Singapore Private Limited (“Flipkart Singapore”) that held shares in Flipkart India Private Limited (“Flipkart India”). Although shares transferred in the Walmart transaction were those of Flipkart Singapore, however, the value of the shares of Flipkart Singapore was derived substantially from assets located in India i.e. shares of Flipkart India, making the transaction an “indirect transfer” of assets held in India under Indian tax law. Despite holding a valid TRC and a Category 1 Global Business Licence from Mauritius, Tiger Global’s entities were denied nil withholding tax certificates under the provisions of the Income-tax Act, 1961[3] (“IT Act”) by the tax department. Tiger Global claimed exemption under the India – Mauritius Double Taxation Avoidance Agreement (“DTAA”)[4] on the basis of the “grandfathering” protection, arguing that the shares had been acquired before 1 April 2017 and should therefore remain outside India’s capital gains tax net. The dispute moved through all three adjudicatory levels, and at each stage reflected a fundamentally different view of treaty protection. i. Authority for Advance Ruling (“AAR”) (2020): The AAR rejected the application, holding that the Mauritius entities were mere conduits and the structure was prima facie tax avoidance. ii. Delhi High Court (“DHC”) (2024): The DHC reversed the AAR ruling, emphasising the primacy and sufficiency of the TRC and allowing grandfathering protection. iii. Supreme Court (2026): The SC overturned the High Court decision, holding that the treaty is meant for direct investments in India, fundamentally recalibrating the importance of TRCs, General Anti-Avoidance Regulations (“GAAR”) and denying treaty protection to indirect transfers. II. THE FIVE PILLARS OF THE SUPREME COURT'S REASONING The Tiger Global Judgment establishes five clear rules that will now govern how offshore investment structures into India will be assessed. Together, they move treaty eligibility away from documentation and towards economic reality, control, and governance. A. India Can Tax What Is Economically “Indian”, Even If It Is Legally Offshore The SC reaffirmed that India can tax transactions where the economic value is rooted in India, even if the legal form of the transaction is offshore. If the underlying value sits in India, shifting ownership through a foreign company i.e. indirect transfers, does not take the transaction outside India’s tax net. This converts indirect transfers from a technical tax issue into a direct structuring risk. B. If Avoidance Is Prima Facie, AAR Will Shut the Door at the Threshold The SC made it clear that if a transaction appears, at first glance, to be designed for tax avoidance, the AAR after providing the applicant an opportunity of being heard,  is bound to refuse a ruling and not examine the application on its merits in accordance with the threshold bar to maintainability of such application.[5] This weakens the traditional reliance on advance rulings as a source of front-loaded certainty. C. A TRC Is No Longer a Shield – It Is Only the Starting Point The SC held that a TRC only establishes formal residence and is merely an eligibility condition for treaty benefit[6], not sufficient evidence of residency. It does not prove that the entity is commercially autonomous, independently managed, or substantively operating from that jurisdiction. If control, decision-making and financial authority sit elsewhere, treaty benefits can be denied even in the presence of a valid TRC. For decades, the market treated a TRC as sufficient evidence of treaty entitlement. This judgment decisively reverses that understanding. On facts, the SC focused on who truly controlled the investment. It noted that above certain internal thresholds, any key decisions, financial authority and exit approvals were exercised outside Mauritius, predominantly from the United States, and the Mauritian entities lacked genuine autonomy making them operationally passive. D. Grandfathering Is No Longer Absolute: GAAR Can Still Bite The SC has dismantled the belief that pre-2017 investments are automatically immune from GAAR. By harmoniously interpreting the provisions of the IT Act[7], the SC held that if a tax benefit arises after 1 April 2017, GAAR can apply even if the investment was made earlier, provided the aggregate tax benefit exceeds the prescribed threshold. Grandfathering now protects timing, not structure. If the structure is a conduit, the acquisition date becomes irrelevant. E. Indirect Transfers Get No Treaty Comfort at All The SC drew a sharp line between direct and indirect transfers. It held that grandfathering and limitation-of-benefits (“LoB”) protection[8] apply only to direct transfers of Indian shares. Indirect transfers fall outside treaty protection altogether. This is critical for PE and VC exits, which more often than not, operate through multi-layered offshore holding structures. III. WHAT BREAKS IMMEDIATELY: WHY EXISTING STRUCTURES ARE NOW EXPOSED The judgment converts treaty protection from a structural assumption into a factual test. Existing offshore holding structures may now be exposed unless they can demonstrate real substance, real control, and real commercial purpose. A. Treaty Shopping Is No Longer Structural – It Is Evidentiary Incorporation in Mauritius or Singapore and possession of a TRC is no longer sufficient. Treaty entitlement now mostly depends on whether the entity can demonstrate genuine substance, independent control, and a commercial purpose beyond tax efficiency. Offshore holding entities that exist primarily as routing vehicles now carry significant risk as structures without autonomous governance, operational capability, and financial authority will struggle to survive scrutiny. Funds may need to reassess exit models, withholding assumptions, indemnity structures and tax gross-up mechanisms. Treaty uncertainty may now be priced into transaction documents rather than treated as a remote contingency. Late-stage exits and secondary transactions will have to take into account higher tax risk through valuation discounts or contractual risk allocation. B. Legacy PE/VC and Intermediate Holding Structures Could Carry Real Exit Tax Risk For funds exiting legacy pre-2017 investments, the risk profile has materially changed. The assumption that such investments are insulated from Indian capital gains tax is no longer reliable. Capital gains exposure will now have to be modelled into exit economics, alongside litigation risk and potential delays in capital repatriation. The Tiger Global Judgment does not block investment. It changes how risk is priced. Structures that lack substance will face slower exits, heavier documentation burdens, and reduced net outcomes. Escrow arrangements, tax holdbacks, and expanded indemnities are likely to become standard features of exit documentation. Term sheets will also reflect this shift. Tax risk allocation will move earlier into negotiations and becoming a valuation variable rather than a closing-stage compliance issue. IV. HOW THIS CHANGES THE MARKET: VALUATIONS, EXITS AND CAPITAL FLOW Tiger Global Judgement converts tax uncertainty into a pricing variable. Capital could become more expensive, exits may become slower, and valuations could become more conservative wherever treaty protection is not structurally defensible. A. Capital Becomes More Expensive When Tax Certainty Disappears When tax outcomes become uncertain, capital tends to become more expensive. Investors either demand higher returns to compensate for risk or reduce exposure altogether. India has already been experiencing a tightening of growth-stage capital as compared to past years. In such an environment, any additional uncertainty around exit taxation may directly affect the access to additional capital. Investors tend to discount future returns more aggressively when exit economics are unclear, particularly in late-stage and secondary transactions. Reduced certainty around offshore exits discourages long-duration capital. Growth-stage funding, which depends most heavily on predictable exit outcomes, is therefore the first to be impacted. B. Valuations Could Fall Where Exit Tax Risk Cannot Be Priced Out The judgment re-introduces the treaty risk into valuation models. Until now, the “India premium” reflected regulatory complexity and currency volatility. It will now also include uncertainty around treaty eligibility and exit taxation. Tax insurance and indemnity pricing could harden. Structures that cannot demonstrate substance may face higher premiums or reduced coverage. In M&A transactions involving Mauritius or Singapore holding structures, counterparties will tend to demand deeper due diligence on governance, control architecture, and evaluate GAAR exposure. C. FPIs and Derivatives Desks Face a Silent Risk Reset Although the case arose from a private equity exit, its reasoning extends to Foreign Portfolio Investors (“FPI”) using offshore treaty structures. The SC’s focus on control and commercial purpose applies equally to FPIs trading Indian Futures & Options (“F&O”) entities. If strategic decisions and risk management occur outside the treaty jurisdiction, treaty benefits could become vulnerable. That exposure may also have to be factored into risk and return calculations. V. THE NEW PLAYBOOK: HOW FUNDS AND INVESTORS MUST NOW BUILD, HOLD AND EXIT INDIA INVESTMENTS After the Tiger Global Judgement, structuring is no longer only a tax exercise. It is a governance, control and credibility exercise. Funds that treat substance as design, not compliance, will preserve certainty. Those that treat it as form will not. A. Governance Documentation and Board Oversight Governance will now become a tax variable. How decisions are taken, who takes them, and where authority truly sits will now determine whether treaty benefits survive as opposed to merely where routine execution is carried out. Boards and investment committees must now treat control architecture as part of tax risk management, not merely corporate hygiene. Governance structure will now be as important as tax structuring. Decision approval rights, banking mandates, veto thresholds and delegation frameworks will have to be examined to determine whether an offshore entity genuinely governs or merely records decisions taken elsewhere. B. Control Must Sit Where You Claim Residence To satisfy the "head and brain test", control must reside where residence is claimed. Funds must demonstrate that strategic, financial, and exit decisions are actually made within the treaty jurisdiction. Board composition, approval authority, financial control mechanisms, functional office premises, dedicated local staff, and IT infrastructure all evidence actual control. C. Spending, People and Infrastructure Will Decide Treaty Survival Treaty survival will now be determined by operational reality and the presence of commercial substance i.e. people, spending, infrastructure and authority. Funds will have to demonstrate real operational presence, decision-capable directors, functioning office infrastructure, locally managed bank accounts, and employees with financial and investment competence. Documentation will now have to evidence deliberation, not ratification. Board minutes will have to show real debate, not formal approval of externally decided outcomes. The burden now squarely lies on the investor to prove that the offshore entity is commercially autonomous. D. Every Exit Needs a GAAR Readiness Review GAAR readiness is one of the key factors in determining exit success. Documentation could make or break treaty entitlement. Legacy structures, even pre-2017, should not assume safety. Groups with legacy offshore structures and future liquidity events will need pre-exit GAAR and treaty reviews. Each financing round should be treated as a structural audit point. Grandfathering reduces exposure only where structure integrity exists, for it does not protect defective architecture. E. GIFT City: From Alternative to Strategic Default GIFT City offers a structural solution, not a workaround. Being a domestic onshore alternative, it replaces treaty dependence with statutory certainty by eliminating treaty risk, reducing GAAR exposure, and anchoring tax benefits in domestic law. For funds willing to locate substance within India, GIFT City is the clearest path to stability. Mauritius and GIFT City serve the same objective i.e. attracting global capital through certainty, the key difference being that GIFT City embeds certainty in statute, not treaty interpretation. VI. CONCLUSION: INDIA IS RAISING THE STANDARD, NOT CLOSING THE DOOR This judgment is not a rejection of foreign capital. It is a recalibration of how India expects capital to be structured. The SC has drawn a clear line between legitimate planning and artificial tax engineering.  What it demands is credibility, real governance, real control and real economic presence. Structures built on documentation alone will not survive. Structures built on substance will. Legally, the ruling is jurisdictional, not determinative. Revenue must still satisfy statutory thresholds, establish impermissible avoidance, and justify attribution and penalties. Defensive space remains but only for investors whose structures reflect commercial reality. For dealmakers, treaty eligibility is no longer a technical assumption verified at closing. It is a factual condition to be designed from inception and maintained throughout the investment lifecycle. Governance architecture, decision-making authority, and documentation discipline are now core components of tax risk management. The choice is no longer between aggressive and conservative structuring. It is between credible and vulnerable structuring. Those who adapt will find India still offers scale, depth, and opportunity. Those who rely on form without substance will find the old playbook obsolete. The Tiger Global Judgement does not signal retreat. It signals maturity and a market confident enough to welcome global capital but no longer willing to subsidise it through legal fiction. [1] The Authority for Advance Rulings (Income Tax) & Ors. v. Tiger Global International II Holdings, 2026 INSC 60 available at < https://api.sci.gov.in/supremecourt/2025/1251/1251_2025_7_1501_67552_Judgement_15-Jan-2026.pdf > [2] Vodafone International Holdings BV v. Union of India, 2012 (6) SCC 757 [3] Section 197, Income-tax Act, 1961 [4] Agreement For Avoidable Of Double Taxation And Prevention Of Fiscal Evasion With Mauritius, (as amended from time to time). [5] Proviso (iii) to Section 245R(2), Income-tax Act, 1961 [6] Section 90(4), Income-tax Act, 1961 [7] Rule 10U(2) r.w Chapter X-A, Income-tax Act, 1961 [8] Article 13(3A), Agreement For Avoidable Of Double Taxation And Prevention Of Fiscal Evasion With Mauritius, 1983 (as amended from time to time). Authored by: Sujoy Bhatia and Vedangshri Vijay 

Argus Partners is pleased to announce that it has advised Claypond Capital on its investment in Easy Home, a technology-based home loans platform focused on faster approvals and streamlined documentation. The investment formed part of Easy Home’s USD 30 million Series C fundraise, which was led by Investcorp and also saw participation from SMBC Asia Fund, apart from Claypond Capital. Easy Home intends to deploy the proceeds to expand into new markets, strengthen its technology platform, and scale its distribution network. The company also plans to grow its loan book and deepen its presence beyond major urban centres, in line with rising demand for affordable housing finance. The team at Argus Partners advising Claypond Capital consisted of Pallavi Kanakagiri (Partner) and Shubham Tiwary (Associate). Read more at: Economic Times, VCCircle, Entrackr.

DMD Advocates advised Maschinenfabrik Reinhausen GmbH (MR), a German-based engineering group, on legal due diligence and transaction documentation in connection with the acquisition of an equity stake in KVTEK Power Systems Private Limited, an India-based manufacturer of power transformers, distribution and instrument transformers, high-voltage cables, and switchgear. The acquisition strengthens MR’s position in high-voltage testing and measurement and supports the strategic expansion of its subsidiary, HIGHVOLT Prüftechnik Dresden GmbH, which operates in the same technology segment. The transaction was led by Vihang Virkar (Lead Partner, Mumbai Corporate Practice Group), along with Monika Deshmukh (Partner), Pooja Shah (Principal Associate), Advait Borade (Associate), Disha Jain (Associate), Vanshikha Choraria (Associate), and Nardeep Chawla (Associate).

We are pleased to share that Argus Partners has advised Fitterfly, a healthcare company focused on diabetes reversal, obesity management, and heart health programmes, on its acquisition by PB Healthcare Services, the healthcare arm of PB Fintech. The acquisition would enable PB Healthcare Services to expand beyond hospitals and strengthen its preventive healthcare and chronic-disease management offerings. The team at Argus Partners advising Fitterfly was led by Ankit Guha and Neha Madan (Partners). Arka Majumdar (Partner) advised on employment law aspects and Namitha Mathews (Partner) advised on real estate aspects of the transaction. Read more at: Business Standard, Moneycontrol, INC42.