- within Tax topic(s)
- with Finance and Tax Executives
- in United States
- with readers working within the Accounting & Consultancy, Technology and Securities & Investment industries
Executive Summary & Disclaimer
The Tiger Global judgement arises from a specific factual context, its reasoning reflects a broader doctrinal move towards an arrangement-centric analysis that weakens traditional assumptions around treaty primacy and grandfathering. This article seeks to analyse ramifications of the judgment and strategic shifts and change in structuring needed in post tiger global judgment scenario. The article provides general information only and is not legal, tax, or financial advice and we assume no responsibility for any action taken or not taken based on the information contained in this article
R & D Law Chambers is a research-driven dispute resolution and advisory practice serving clients across India and internationally. We operate at the intersection of taxation, cross-border structuring, arbitration, commercial litigation, and regulatory matters.
To explore our services, visit https://rdlawchambers.com/our-services/
Index of Topics that a Reader can Jump to:-
- Pre–Tiger Global Framework — Treaty Supremacy, GAAR Design, TRC Regime, and International Norms
- The Tiger Global Judgment: Reasoning, Findings and Doctrinal Shifts
- Legal and Policy Implications
- The Way Forward: Structuring, Risk Management and Post–Tiger Global Strategy
- Relevant Aspects for Devising Future Strategies and Planning
5.3 Relevance of MAP in a Post–Tiger Global Landscape
- Pre–Tiger Global Framework — Treaty Supremacy, GAAR Design, TRC Regime, and International Norms
1.1 Evolution of India's Treaty Jurisprudence from Azadi Bachao Andolan Onwards
India's modern treaty jurisprudence was shaped by the Supreme Court's decision in Union of India v. Azadi Bachao Andolan (2003). The judgment arose in the context of challenges to Circular No. 789, which clarified that a valid Tax Residency Certificate (TRC) issued by the Mauritian authorities would constitute sufficient evidence of residence for purposes of claiming benefits under the India–Mauritius DTAA.
This judgment established two foundational propositions; it affirmed that tax treaties are instruments of economic and fiscal policy, through which the State voluntarily agrees to limit its domestic taxing rights and it further held that courts cannot deny treaty benefits by importing anti-abuse concepts that are not found either in the treaty text or in domestic legislation.
The Court also recognised that while treaty shopping may be viewed as undesirable from a revenue perspective, it is not unlawful unless specifically restricted by the treaty or by statute. In doing so, the Court consciously distinguished between judicial interpretation and legislative or executive policy choices. The court held that anti-abuse norms must be traced to negotiated treaty provisions or enacted domestic law, not from judicial discomfort with the consequences of treaty design.
1.2 Statutory Scheme of Section 90, Section 90(2A) and Chapter X-A (GAAR)
Section 90 of the Income-tax Act provides the statutory mechanism for operation and supremacy of a tax treaty. Sub-section (2) embodies the well-known "more beneficial" rule, under which an assessee is entitled to apply either the provisions of the Act or the treaty, whichever is more favourable to him and courts consistently treated treaty relief as a statutory override consciously permitted by Parliament, not as an exception to be narrowly construed.
This landscape changed with the introduction of Chapter X-A (GAAR), which came into force from 1 April 2017. GAAR was designed as a general anti-avoidance framework enabling the tax administration to deny tax benefits arising from arrangements that are impermissible avoidance arrangements.
Section 90(2A) was inserted simultaneously providing that the provisions of Chapter X-A shall apply "notwithstanding anything contained in sub-section (2) of section 90". This provision explicitly contemplates situations where GAAR may operate even if it results in an outcome less beneficial than the treaty.
** While sub-section 2A of section 90 appears to be providing for treaty override, in the opinion of the author, correct interpretation should be that entitlement or disentitlement to treaty benefits has to be decided solely looking at the provisions of a treaty. In case of having found disentitlement in terms of treaty, harsher consequences under GAAR could further apply. This aspect is discussed in subsequent part of this article.
1.3 Grandfathering Under Tax Treaties and the Policy Rationale Behind Rule 10U(1)(d)
A key feature of India's GAAR implementation was the decision to include grandfathering provisions. Rule 10U(1)(d) provides that provisions of Chapter X-A(GAAR) would not apply to any income accruing or arising to, or deemed to accrue or arise to, or received or deemed to be received by, any person from transfer of investments made before the1st day of April, 2017 by such person.
This grandfathering mechanism intended to preserving the integrity of the pre-GAAR treaty framework for legacy investments while allowing GAAR to operate prospectively.
1.4 TRC Regime and the Historical Presumption of Treaty Residence
Within the pre-GAAR framework, the TRC regime played a central role in determining treaty entitlement. Circular No. 789 clarified that a TRC issued by the competent authority of the treaty partner would constitute sufficient evidence of residence. This position was expressly upheld in Azadi, with the Court emphasising the binding nature of CBDT circulars on the tax administration.
Historically, the TRC functioned not merely as a piece of evidence and rather as a conclusive evidence.
- The Tiger Global Judgement: Reasoning, Findings and Doctrinal Shifts
Factual Background and the Structure Examined by the Supreme Court
The Tiger Global case arose from investments made by offshore entities associated with the Tiger Global group into Indian companies through intermediary jurisdiction- Mauritius. The assessees claimed capital gains exemption under applicable tax treaties, supported by valid Tax Residency Certificates issued by Mauritius Revenue Authority. The investments themselves had been made prior to the introduction of GAAR, and the exits giving rise to capital gains occurred thereafter.
The Revenue did not dispute the formal existence of the entities or the validity of the TRCs. Instead, the enquiry focused on whether the arrangement, viewed holistically, resulted in a tax benefit obtained through an impermissible avoidance arrangement, thereby attracting the application of Chapter X-A. AAR ruled against the assessee and High Court reversed AAR findings.
On the challenge by the revenue before the Supreme Court, it treated the case not as one involving sham entities or invalid TRCs, but as a test of how far GAAR can operate against treaty-supported, pre-GAAR investments that generate tax benefits after GAAR's commencement. Relying on Section 90(2A), the Court held that treaty benefits are not immune from GAAR scrutiny and that the "more beneficial" rule under Section 90(2) is expressly subordinated to Chapter X-A. It interpreted Rule 10U(2) to dilute grandfathering under Rule 10U(1)(d), holding that the timing of the investment is not decisive if the arrangement continues to yield post-GAAR tax benefits. The judgment further reduced the evidentiary finality of TRCs, allowing authorities to look beyond formal residence to substance, control, and "head and brain" considerations even without alleging sham or conduit status. Overall, the Court shifted the analytical focus from treaty allocation to the design and purpose of the arrangement, applying GAAR in a manner that largely bypasses traditional Vienna Convention–based treaty interpretation.
- Legal and Policy Implications
A central question arising from the Tiger Global judgment is whether it should be read as a decision confined to its particular factual matrix or as a broader re-statement of India's approach to the interaction between GAAR and tax treaties.
While Tiger Global can, at one level, be described as arising from a specific factual matrix involving indirect transfers through offshore holding structures and a GAAR challenge in the context of AAR jurisdiction, the Supreme Court did not frame its conclusions in fact-limited terms. The judgment does not confine its reasoning to indirect transfers, to particular jurisdictions, or to treaties lacking express anti-abuse clauses. Instead, it articulates principles of general application, holding that once an arrangement is found to be impermissible under Chapter X-A, treaty benefits cannot be claimed and GAAR consequences necessarily follow. In this sense, although the facts provided the occasion for the ruling, the Court's reasoning reflects a broader doctrinal shift rather than a narrow, transaction-specific determination.
The broader policy risk highlighted by Tiger Global is the possibility of unilateral expansion of treaty anti-abuse thresholds through domestic interpretation. If GAAR can be invoked to deny treaty benefits in situations where the treaty itself would allow them, the negotiated balance between source and residence States is altered unilaterally.
This has implications beyond individual cases. It affects how treaties are perceived by investors and counterpart States alike. Treaty stability depends not only on formal adherence to treaty text but also on predictable and restrained application of domestic override mechanisms.
- The Way Forward: Structuring, Risk Management and Post–Tiger Global Strategy
The Tiger Global judgment marks a clear inflection point in India's post-GAAR treaty jurisprudence. While legitimate debate remains on whether the Supreme Court's interpretation of Rule 10U and its engagement with treaty interpretation principles under Articles 31 to 33 of the Vienna Convention fully reflect settled international norms, the judgment nonetheless represents the law as it currently stands. In particular, it clarifies that grandfathering of pre-2017 investments is not mechanically available in all cases and that GAAR may be invoked even in a treaty context.
In the author's view, legislative refinement or calibrated administrative guidance would go a long way in restoring confidence without diluting anti-abuse objectives. Pending such clarification, however, the way forward for investors, funds, and advisers lies neither in treating Tiger Global as laying down an absolute rule applicable to all situations, nor in dismissing it as a purely fact-specific decision with no wider implications.
What will rather help is careful identification of the questions the judgment does not address, and an appreciation of how GAAR risk must now be assessed across the life cycle of cross-border investments and the author seeks to address relevant aspects for devising future strategies including the possibility of prospective realignment of structures hereunder.
- Relevant Aspects for Devising Future Strategies and Planning
5.1 The Missed Sequencing Question: Treaty Entitlement, Abuse Determination and the Proper Role of GAAR
Perhaps the most significant doctrinal issue left unresolved by Tiger Global is the sequencing question—whether entitlement to treaty benefits must first be tested within the treaty framework, with GAAR operating only thereafter to determine domestic consequences, or whether GAAR itself can function as the primary gatekeeper to treaty entitlement.
The judgment clearly establishes that GAAR may apply notwithstanding treaty provisions by virtue of Section 90(2A), and that neither a valid TRC nor grandfathering under Rule 10U(1)(d) provides absolute immunity. However, the Court does not examine how GAAR should interact with treaties that contain negotiated anti-abuse standards, such as comprehensive PPT or detailed LOB clauses.
This omission is doctrinally significant. In the author's view, under international treaty law, abuse is ordinarily assessed within the four corners of the treaty itself, with domestic anti-avoidance rules operating to give effect to the consequences of such denial, rather than unilaterally expanding the threshold for entitlement. This "decide entitlement under treaty -first, apply GAAR consequences in treaty framework later" sequencing aligns with Vienna Convention principles and with comparative international practice.
The Tiger Global judgment does not reject this approach; it simply does not address it. The treaty in issue did not contain a full-blown PPT regime, and the dispute was framed as a contest between treaty entitlement simpliciter and GAAR applicability. Accordingly, the judgment should not be read as foreclosing the sequencing argument in future cases, particularly under modern treaties, including under a post-protocol India–Mauritius treaty, where PPT or robust LOB clauses expressly govern entitlement. As India's treaty network increasingly incorporates PPT-based standards, courts will inevitably be required to confront this sequencing question, making it a central consideration in future litigation strategy.
5.2 Existing Structures and Prospective Realignment: Substance, Governance and Evidentiary Discipline
A recurring concern following Tiger Global is whether existing structures can be realigned without inviting adverse inference. The judgment does not hold that pre-existing structures are shams, nor does it suggest that compliance-driven improvements in governance or substance are inherently suspect. GAAR targets impermissible avoidance arrangements, not bona fide evolution in response to legal developments.
That said, the nature of restructuring remains critical. Cosmetic changes unsupported by governance in practice, are unlikely to mitigate risk. Also, changes proximate to exit will face greater and more thorough scrutiny. Conversely, prospective realignment that genuinely reallocates control, embeds decision-making authority, and reflects commercial realities is consistent with both the text and purpose of Chapter X-A. In this context, emphasis shifts from formal indicators to lived governance, what decisions are taken, where they are taken, who takes them, and how they are contemporaneously documented.
5.3 Relevance of MAP in a Post–Tiger Global Landscape
The Tiger Global judgment also underscores the limits of domestic certainty mechanisms. While the Authority for Advance Rulings is not rendered redundant, its utility is clearly constrained where GAAR allegations are in play. Assessees must therefore approach the AAR with realistic expectations, particularly where jurisdictional bars may preclude a merits determination.
In this environment, the Mutual Agreement Procedure (MAP) assumes renewed relevance, albeit as a defensive and corrective mechanism rather than a source of upfront certainty. MAP does not neutralise GAAR, nor does it override domestic law. Its value lies in addressing treaty interpretation disputes and mitigating double taxation where divergent views arise between contracting States. While procedurally demanding, MAP can, if used judiciously, function as a meaningful lever in managing post-assessment treaty risk.
About the Author
Ravish is a dual-qualified lawyer and solicitor licensed to practice in India and on the role of the Solicitors Regulation Authority (England and Wales). He specialises in international arbitration and international taxation, and holds the Advanced Diploma in International Taxation (ADIT) from the Chartered Institute of Taxation (CIOT).
LinkedIn Profile: https://www.linkedin.com/in/adit-ravishbhatt/
Services We Provide
- International & Domestic Arbitration – Strategic representation in high-value commercial disputes, EPC/infrastructure claims, shareholder conflicts, emergency relief, and enforcement or challenge of awards in India.
- Commercial Disputes & Litigation – End-to-end support in contract disputes, injunctions, recovery actions, business torts, and tribunal-ready documentation before courts and arbitral tribunals.
- Insolvency & Bankruptcy (IBC/NCLT) – Creditor and debtor representation, Section 7/9 filings, CIRP strategy, resolution plan negotiations, and complex NCLT litigation.
- Taxation (Direct, Indirect & International) – Advisory and litigation covering income tax, GST, customs, transfer pricing, as well as treaty-driven international tax and cross-border structuring.
- Contract Drafting, Negotiation & Risk Management – Cross-border commercial agreements, EPC contracts, MSAs/SLAs, technology and licensing documents, shareholder agreements, and long-term project contracts.
- GIFT City / IFSC Advisory – Regulatory, tax and transactional support for entities operating in or entering IFSC, including fund formation, fintech, global service centres and cross-border structuring.
- Real Estate, Development & Property Law – Due diligence, transactional documentation, RERA compliance, leasing/licensing and dispute management for residential, commercial and industrial projects.
- Employment & Labour Advisory – Employment contracts, HR policies, compliance frameworks, workforce exits, investigations, POSH matters and employment disputes.
- IP, IT & Technology Law – SaaS and software agreements, technology licensing, digital-business documentation, data protection, IP monetisation and innovation-centric contracting.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
