India: GAAR applied to deny capital gains exemption for indirect share transfer under Mauritius treaty (Supreme Court decision)
Shares were originally acquired before April 1, 2017, but were transferred after that date.
The Supreme Court held that the general anti avoidance rule (GAAR) and the statutory treaty override mechanism, which were introduced effective April 1, 2017, applied to deny the capital gains exemption under the India-Mauritius income tax treaty for a transfer after April 1, 2017, of shares in a foreign company (the value of which was derived substantially from assets located in India) by a Mauritian tax resident, pursuant to an impermissible tax avoidance arrangement.
The court clarified that the GAAR may override the treaty provisions even though the shares of the foreign company were originally acquired before April 1, 2017. In addition, the court confirmed that following introduction of GAAR and the statutory treaty override mechanism, a tax residency certificate (TRC) does not bar the tax authorities from examining whether an arrangement is tax avoidant. Moreover, the court found that tax authority guidance and judicial precedents from the pre-GAAR era were inapplicable as they could not supersede the later statutory amendments.
The case is: The Authority for Advance Rulings (Income-tax) and others v. Tiger Global International II Holdings
Read a January 2026 report prepared by the KPMG member firm in India