Tiger Global's Walmart deal taxable in India 

The Prima Facie Threshold for Tax Avoidance

Under Section 245R(2) of the Income Tax Act, the AAR is empowered to reject an application at the threshold if it appears "prima facie" to be for tax avoidance . A "prima facie" case does not require the matter to be "proved to the hilt"; rather, it is a lower evidentiary threshold based on an initial examination. The Court found that the AAR properly exercised this power, as the evidence suggested the Mauritian entities were interposed as devices to exploit the India-Mauritius Double Taxation Avoidance Agreement (DTAA) .

Control and Management ("Head and Brain")

A central factor in the AAR’s rejection — and the Supreme Court's concurrence — was that the real control and management of the respondent companies did not reside in Mauritius . While the companies were incorporated in Mauritius, authority for transactions exceeding USD 250,000 was vested in Mr. Charles P. Coleman, who was based in the USA . The AAR concluded that the "head and brain" of the companies was situated in the USA, and the Mauritian entities were merely "see-through entities" lacking independent decision-making autonomy .

The Role of the Tax Residency Certificate (TRC)

While a TRC is a necessary condition for claiming treaty benefits under Section 90(4), it is not a sufficient condition. 

Following legislative amendments to Chapter XA and the insertion of Section 90(2A), tax authorities are no longer precluded from "piercing the veil" . 

GAAR and the "Grandfathering" Clause

The respondents argued that their investments were "grandfathered" under the General Anti-Avoidance Rule (GAAR) because they were made prior to April 1, 2017. Rule 10U(1)(d) protects income from the transfer of investments made before the cut-off date .Rule 10U(2) acts as a limitation, stating that Chapter XA (GAAR) applies to any arrangement yielding a tax benefit on or after April 1, 2017, regardless of when the arrangement was entered into. Because the transfer of shares and the resulting tax benefit occurred in 2018 (after the cut-off date), the Court held that the grandfathering protection was not absolute if the underlying arrangement was found to be for tax avoidance .

Conclusion on Taxability

The Supreme Court concluded that once an arrangement is factually found to be impermissible under law, the taxpayer is not entitled to claim exemptions under Article 13(4) of the DTAA. Consequently, the capital gains arising from these transfers are taxable in India under the Income Tax Act read with the relevant provisions of the DTAA. The ruling affirms the sovereign right of a nation to assert its taxing power over income derived from its own soil, particularly when faced with aggressive tax-avoidance strategies.