India: PE firm Tiger Global moves Delhi High Court against Flipkart tax ruling

FILE PHOTO: The logo of Flipkart is seen on the company's office in Bengaluru, India, May 9, 2018. REUTERS/Abhishek N. Chinnappa/File photo

New York-based private equity (PE) investor Tiger Global on Monday moved the Delhi High Court against the quasi-judicial body ruling. The ruling in June by Authority of Advance Ruling (AAR) had denied the PE firm benefits of grandfathering provisions under the India-Mauritius Double Tax Avoidance Agreement when it exited Flipkart in 2018.

The matter is listed to be heard on Tuesday.

“There is enough substance and decision making in the deal structure to get India-Mauritius treaty benefits. The AAR has not gone into all the aspects of the deal before it denied treaty benefits to Tiger Global,” said a person with direct knowledge of the matter.

The Authority for Advance Rulings (AAR) had rejected a petition by Tiger Global claiming an exemption from tax on capital gains resulting from the 2018 sale of its Flipkart stake to Walmart. Tiger Global had claimed nil withholding tax on the capital gains, since its investment firms, which made the Flipkart investment, were based in Mauritius and were set up before 2017. AAR ruled that they suspect the tax treaty is being abused to avoid tax.

AAR held that the Mauritius companies were only “see-through entities” created to avail the tax treaty and the real beneficiary was the US firm.

“Tiger Global and its Mauritius entities have enough protection in the tax treaty to dispute the AAR ruling,” the person quoted earlier in the story said.

The new India-Mauritius tax treaty protects investments from Mauritius before 2017 and continues to grant them treaty benefits.

At least four rulings by AAR, including the one against Tiger Global, have labelled investments through Mauritius as a tax avoidance route and thus not eligible for treaty benefits.

While investments through the Mauritius route and tax litigation have always been a grey area in taxation matters, these recent cases are being viewed by investors as setting a precedent, which will make them pay 21% tax on exits.

This article was first published on livemint.com.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.