In a landmark judgment delivered on January 15, 2025, the Supreme Court of India ruled that Tiger Global’s approximately $1.6 billion stake sale in Flipkart to Walmart is subject to capital gains tax in India. The decision, delivered by a two-judge bench comprising Justices J.B. Pardiwala and R. Mahadevan, overturned the Delhi High Court’s favorable verdict and sided with the Income Tax Department, declaring that the transaction constituted an impermissible tax avoidance arrangement. The ruling has sent ripples through the international investment community, fundamentally reshaping how foreign investors structure their exits from Indian companies and reinforcing India’s sovereign right to tax income arising within its borders.

The case stemmed from Walmart’s monumental $16 billion acquisition of Flipkart in 2018, one of the largest mergers in India’s technology sector. During this transaction, US-based investment firm Tiger Global divested approximately 17 percent of its stake through its Mauritius-based entities, generating substantial capital gains. Tiger Global sought exemption from Indian capital gains tax by invoking the India-Mauritius Double Taxation Avoidance Agreement, arguing that its investments were protected under treaty provisions. The Income Tax Department challenged this arrangement, asserting that the Mauritius entities lacked commercial substance and served merely as conduits designed to exploit treaty benefits for tax avoidance.

The Legal Journey Through Multiple Forums

The dispute navigated a complex legal trajectory spanning multiple judicial forums over nearly five years. In March 2020, the Authority for Advance Rulings initially rejected Tiger Global’s application for an advance ruling, determining that the transaction was prima facie designed for tax avoidance and therefore barred under the Income Tax Act. This decision marked the beginning of a protracted legal battle that would eventually reach the apex court. The AAR held that the statutory bar under the proviso to the Income Tax Act, 1961 prevented it from entertaining applications related to transactions designed for tax avoidance [1].

However, in August 2024, the Delhi High Court reversed the AAR’s decision and ruled in favor of Tiger Global. The High Court held that Tiger Global’s Mauritius entities were entitled to capital gains tax exemption under the India-Mauritius DTAA and that the firm had satisfied all requirements for treaty benefits. This decision appeared to vindicate Tiger Global’s position and reinforced the principle that tax residency certificates issued by foreign authorities should generally be respected in determining treaty eligibility. The High Court emphasized that revenue authorities could not impose additional roadblocks beyond what the treaty itself required.

The Income Tax Department swiftly challenged this decision before the Supreme Court. On January 24, 2025, the Supreme Court issued a stay order on the Delhi High Court judgment, observing that the issues raised required thorough consideration and warranted examination by the apex court. The stay signaled the Court’s inclination to scrutinize the transaction more closely and assess whether the High Court had correctly interpreted the applicable tax laws and treaty provisions. Just weeks later, on January 15, 2025, the Supreme Court delivered its final verdict, comprehensively rejecting Tiger Global’s claims and restoring the tax department’s position.

Understanding the India-Mauritius Tax Treaty Framework

The India-Mauritius Double Taxation Avoidance Agreement has historically been one of the most significant tax treaties influencing foreign investment into India. Originally notified on December 6, 1983, the DTAA was designed to facilitate investment flows between the two countries by preventing double taxation and encouraging mutual trade and investment. Under the original treaty framework, capital gains arising from the alienation of shares were taxable only in the state of residence of the shareholder, not in the source country where the company was located [2].

This arrangement created a powerful incentive for foreign investors to route their Indian investments through Mauritius. Since Mauritius did not levy capital gains tax on the sale of shares, investors could effectively exit their Indian investments without paying capital gains tax in either jurisdiction. This zero-tax regime on capital gains made Mauritius the preferred jurisdiction for foreign portfolio investors and private equity funds investing in India. Between 2000 and 2015, over one-third of all foreign investments into India were channeled through Mauritius, demonstrating the treaty’s significant impact on investment patterns.

However, concerns about treaty shopping and round-tripping of funds led to significant amendments to the India-Mauritius DTAA in 2016. A protocol signed on May 10, 2016 introduced source-based taxation for capital gains arising from the sale of shares acquired on or after April 1, 2017. The amendment granted India the right to tax such capital gains, albeit at a reduced rate of 50 percent of the domestic tax rate for an initial transition period. Critically, the amendment included a grandfathering provision that protected investments made before April 1, 2017 from the new taxation regime [3]. This grandfathering clause became central to Tiger Global’s defense, as the firm had acquired its Flipkart shares between October 2011 and April 2015, well before the cutoff date.

Tiger Global’s Investment Structure and Tax Defense

Tiger Global’s investment in Flipkart was structured through multiple Mauritius-based entities, specifically Tiger Global International II Holdings, Tiger Global International III Holdings, and Tiger Global International IV Holdings. These Mauritius entities held shares in Flipkart Singapore, which in turn derived substantial value from assets and operations located in India. When Walmart acquired Flipkart in 2018, Tiger Global sold its stake through these Mauritius entities to Luxembourg-based entities affiliated with Walmart, generating capital gains of approximately Rs 14,500 crore.

Tiger Global’s defense rested on several key arguments. First, the firm contended that its Mauritius entities possessed valid Tax Residency Certificates issued by Mauritius Revenue Authorities, which should be conclusive proof of their eligibility for treaty benefits. Second, Tiger Global argued that since its shares were acquired before April 1, 2017, they fell within the grandfathering provisions of the amended treaty and remained protected from Indian capital gains tax. Third, the firm maintained that its corporate structure complied with all legal requirements and that the mere interposition of Mauritius entities could not, by itself, constitute tax avoidance. Tiger Global emphasized that tax planning within the framework of law was permissible and that it had legitimately structured its investments to optimize tax efficiency.

The Income Tax Department challenged these contentions on multiple grounds. Revenue authorities argued that the Mauritius entities lacked economic substance and commercial purpose, serving merely as shell companies designed to circumvent Indian tax laws. The department contended that the real transaction was between Tiger Global’s US parent company and Walmart, with the Mauritius entities acting as artificial conduits inserted solely to claim treaty benefits. Furthermore, tax authorities invoked the General Anti-Avoidance Rules and anti-abuse provisions to assert that the entire arrangement constituted treaty shopping designed primarily to avoid legitimate tax obligations in India.

The Supreme Court’s Landmark Analysis

The Supreme Court’s judgment delivered a decisive blow to Tiger Global’s position, holding that the transaction amounted to an impermissible tax avoidance arrangement that could not enjoy treaty protection. Justice R. Mahadevan, speaking for the bench, observed that the transaction was designed as an impermissible tax avoidance arrangement and therefore could not claim exemption from paying tax on the profits from the stake sale. The Court emphasized that once a transaction is found to be prima facie structured to avoid income tax, the statutory bar applies and tax authorities need not examine the merits of taxability in detail.

Central to the Supreme Court’s reasoning was the application of the proviso to the Income Tax Act, 1961, which explicitly bars the Authority for Advance Rulings from entertaining applications related to transactions designed prima facie for tax avoidance. The Court held that the AAR had correctly identified the arrangement as falling within this jurisdictional bar and that the Delhi High Court had erred in interfering with the AAR’s findings. The Supreme Court noted that the Revenue had successfully established, at least on a prima facie basis, that the investment structure was designed to avoid Indian tax and therefore attracted the statutory bar.

The judgment also addressed the fundamental question of sovereign taxing powers and treaty interpretation. The Supreme Court framed the dispute as an issue of sovereign rights, warning against artificial structures designed to dilute a country’s inherent authority to tax income arising within its borders. The bench stated that taxing income arising out of its own country is an inherent sovereign right of that country, and any dilution of this power through artificial arrangements constitutes a direct threat to sovereignty and long-term national interest [4]. This strong language underscored the Court’s view that protecting India’s tax base from aggressive planning schemes is essential to preserving economic sovereignty.

Application of General Anti-Avoidance Rules

A critical aspect of the Supreme Court’s judgment was its treatment of the General Anti-Avoidance Rules introduced under Chapter X-A of the Income Tax Act. GAAR provisions, which became effective from April 1, 2017, empower tax authorities to declare arrangements as impermissible avoidance arrangements and deny tax benefits where the main purpose of the arrangement is to obtain such benefits. The Supreme Court affirmed that GAAR can override treaty benefits, a position established through the Income Tax Act under the principle that domestic anti-avoidance rules apply notwithstanding treaty provisions [5].

The Court observed that while tax planning is permissible, once a mechanism is found to be a sham or impermissible under law, it ceases to be legitimate avoidance and becomes evasion, entitling the Revenue to deny treaty benefits and invoke GAAR. This distinction between legitimate tax planning and impermissible tax avoidance became a cornerstone of the judgment. The Court emphasized the substance over form principle, holding that if the commercial purpose is merely to route money for tax benefits without genuine economic activity, the arrangement should be taxed in India regardless of the technical compliance with treaty provisions.

Significantly, the Supreme Court clarified that GAAR can apply to any arrangement where a tax benefit is claimed on or after April 1, 2017, making both the investment cutoff date and the longevity of the structure potentially irrelevant if it lacks commercial substance. This interpretation has profound implications for grandfathered investments. While Tiger Global had acquired its shares before the 2017 cutoff, the Court’s reasoning suggests that the exit transaction in 2018 could still be examined under GAAR if it was structured primarily to obtain tax benefits. This effectively dilutes the protection that many investors believed grandfathering provisions would provide [6].

Tax Residency Certificates and Economic Substance

The Supreme Court’s judgment significantly diminished the weight accorded to Tax Residency Certificates in determining treaty eligibility. Tiger Global had relied heavily on TRCs issued by Mauritius Revenue Authorities as conclusive evidence of its entities’ residence status and eligibility for treaty benefits. However, the Court held that the mere possession of a TRC cannot prevent subsequent inquiry, particularly after amendments introducing anti-avoidance provisions. The Court specifically noted that the mere holding of a TRC cannot by itself prevent an inquiry subsequent to the amendments brought into the statute, particularly by the introduction of the Income Tax Act and GAAR provisions, if it is established that the interposed entity was a device to avoid tax [7].

This holding establishes that tax residency certificates are not conclusive where entities lack real commercial substance. Tax authorities retain the power to look beyond formal documentation and examine whether the foreign entity has genuine economic presence and business operations in the treaty jurisdiction. Factors such as the presence of employees, office infrastructure, decision-making authority, and the conduct of substantive business activities become relevant in determining whether treaty benefits should be granted. The Court’s reasoning aligns with international best practices that emphasize substance over form in combating treaty abuse.

The economic substance doctrine has gained prominence globally, particularly following the OECD’s Base Erosion and Profit Shifting initiative. The BEPS project, which India actively supports, recognizes that tax treaties should not be available for purely artificial arrangements lacking commercial reality. The Supreme Court’s emphasis on commercial substance reflects this international consensus and brings Indian tax jurisprudence in line with global anti-abuse standards. The judgment sends a clear message that foreign investors must demonstrate genuine economic activity and business purpose beyond merely obtaining tax benefits to qualify for treaty protection.

Implications for Foreign Investment Structures

The Supreme Court’s ruling has far-reaching implications for how foreign investors structure their investments into India. The decision particularly affects private equity funds, venture capital investors, and foreign portfolio investors who have traditionally relied on Mauritius and Singapore as preferred treaty jurisdictions. These investors must now carefully evaluate whether their offshore structures possess sufficient economic substance to withstand scrutiny under the enhanced anti-abuse framework established by this judgment.

Tax experts have described the verdict as a watershed moment that could fundamentally alter cross-border investment patterns. Foreign investors who entered India through the Foreign Direct Investment and Foreign Portfolio Investment routes had relied on the certainty provided by tax treaties and the validity of Tax Residency Certificates. That assurance is no longer available in its previous form. Global investors will now need to factor capital gains tax costs into their investment models from the outset, potentially making India marginally less attractive compared to jurisdictions with more favorable tax treatments [8].

The ruling strengthens the Income Tax Department’s ability to challenge offshore exit structures even for pre-2017 investments. While the judgment does not automatically reopen closed cases, it significantly bolsters the department’s position in reassessment proceedings where permitted by law. Investors with Mauritius and Singapore-based structures, including for investments made before 2017, may face increased scrutiny regarding the commercial substance of their arrangements. The tax department can now invoke the principles established in this judgment to deny treaty benefits where arrangements lack genuine business purpose.

Looking forward, investors are likely to reconsider their holding structures and may shift toward jurisdictions with more robust substance requirements that are explicitly recognized in treaties. The India-Singapore DTAA, which contains a specific Limitation of Benefits clause with objective criteria including an expenditure test, may become more attractive despite the need to meet higher substance thresholds. Alternatively, some investors may opt for direct investments without intermediate holding structures, accepting the tax costs but gaining certainty and simplicity. The verdict may also accelerate the trend toward investing through dedicated India-focused funds that maintain substantial operations and decision-making presence in recognized jurisdictions [9].

Regulatory Framework Governing Cross-Border Taxation

The Tiger Global case highlights the complex regulatory framework governing cross-border taxation in India. At the statutory level, the Income Tax Act, 1961 provides the foundation for taxing capital gains, including gains from the transfer of shares. The Act also contains specific provisions addressing tax avoidance, including the General Anti-Avoidance Rules under Chapter X-A and the Specific Anti-Avoidance Rules scattered throughout the statute. These domestic provisions interact with India’s network of Double Taxation Avoidance Agreements to create a multilayered tax framework.

Section 90 of the Income Tax Act governs the implementation of tax treaties in India. This provision empowers the Central Government to enter into agreements with foreign countries for granting relief from double taxation and avoiding taxation. Critically, the provision establishes that where treaty provisions are more beneficial than domestic law, the assessee can claim treaty benefits. However, this principle is now subject to anti-avoidance provisions that allow authorities to deny benefits where arrangements are designed primarily for tax avoidance. The interplay between treaty benefits and domestic anti-abuse rules has been a source of significant litigation, with the Tiger Global case providing important clarification on how courts will balance these competing considerations.

The Authority for Advance Rulings, established under Chapter XIX-B of the Income Tax Act, provides a mechanism for taxpayers to obtain certainty regarding the tax treatment of proposed transactions. However, the AAR’s jurisdiction is expressly limited by the Income Tax Act, which prohibits it from entertaining applications relating to transactions designed prima facie for tax avoidance. This statutory bar, reinforced by the Supreme Court’s judgment, means that taxpayers cannot use the advance ruling mechanism to obtain approval for arrangements that appear designed primarily to avoid tax, regardless of whether such arrangements technically comply with treaty provisions.

Lessons from International Jurisprudence

The Supreme Court’s reasoning in the Tiger Global case reflects a broader global trend toward strengthening anti-abuse measures in international taxation. Many developed countries have implemented General Anti-Avoidance Rules or similar doctrines to combat treaty shopping and artificial profit shifting. Countries including Australia, Canada, New Zealand, South Africa, China, France, and Germany had adopted GAAR provisions before India introduced its framework, providing valuable precedents for Indian courts to consider.

The OECD’s BEPS initiative has been particularly influential in shaping international approaches to treaty abuse. BEPS Action 6 specifically addresses treaty shopping and recommends that countries adopt minimum standards to prevent the granting of treaty benefits in inappropriate circumstances. These standards include incorporating Principal Purpose Tests or Limitation of Benefits clauses in tax treaties to ensure that treaty benefits are available only for genuine business arrangements. India’s adoption of these principles through both treaty amendments and domestic legislation reflects its commitment to international best practices in combating tax avoidance.

The recent amendments to the India-Mauritius DTAA, which introduced a Principal Purpose Test in the protocol signed in March 2024, further align the treaty with BEPS recommendations. Under the PPT, treaty benefits will not be granted if obtaining such benefits was one of the principal purposes of the arrangement. This standard, with its lower threshold compared to GAAR which requires tax avoidance to be the main purpose, may have broader application and could affect a wider range of transactions. The combination of treaty-level PPT provisions and domestic GAAR rules creates a robust framework for addressing tax avoidance in cross-border transactions.

The Path Forward for Investors and Tax Authorities

Following the Supreme Court’s landmark ruling, both foreign investors and tax authorities must adapt to the new legal landscape. For investors, the judgment necessitates a fundamental reassessment of investment structures and tax planning strategies. Entities investing through Mauritius, Singapore, or other treaty jurisdictions must ensure they have demonstrable economic substance, including physical presence, local employees, substantive business operations, and genuine decision-making authority in those jurisdictions. Merely incorporating an entity and obtaining a Tax Residency Certificate will no longer suffice to claim treaty benefits if the arrangement lacks commercial substance.

Tax authorities, armed with the Supreme Court’s endorsement of their anti-abuse powers, are likely to scrutinize cross-border transactions more aggressively. The judgment provides strong precedent for challenging offshore exit structures, particularly where the underlying assets or business operations are substantially located in India. Revenue officers can now invoke both GAAR provisions and the substance over form principle to deny treaty benefits even where taxpayers have obtained Tax Residency Certificates and appear to meet formal treaty requirements. However, authorities must exercise these powers judiciously to avoid creating excessive uncertainty that could deter legitimate foreign investment.

The judgment also raises important questions about the balance between protecting India’s tax base and maintaining an attractive investment climate. While the Supreme Court’s decision reinforces India’s sovereign taxing rights and strengthens anti-abuse mechanisms, it also introduces elements of uncertainty for foreign investors who must now navigate a more complex and potentially subjective assessment of their structures. Achieving the right balance requires clear guidelines from tax authorities on what constitutes sufficient economic substance, transparent application of anti-abuse rules, and fair dispute resolution mechanisms that respect legitimate commercial arrangements while preventing abusive planning.

Conclusion

The Supreme Court’s decision in the Tiger Global case represents a defining moment in India’s approach to international taxation and treaty interpretation. By holding that Tiger Global’s $1.6 billion stake sale in Flipkart is subject to Indian capital gains tax, the Court has sent an unmistakable message that India will not tolerate artificial structures designed primarily to exploit treaty benefits without genuine commercial substance. The judgment reinforces the principle that tax residency certificates are not conclusive and that authorities can look beyond formal compliance to examine whether arrangements possess real economic purpose.

The ruling’s implications extend far beyond this specific case, potentially reshaping how billions of dollars in foreign investment are structured. Private equity funds, venture capital investors, and portfolio investors must now carefully evaluate their offshore structures and ensure they meet enhanced substance requirements. The combination of GAAR provisions, treaty-level Principal Purpose Tests, and the Supreme Court’s robust interpretation of anti-abuse rules creates a formidable framework for combating tax avoidance in cross-border transactions. While this approach aligns India with international best practices, it also requires careful implementation to maintain investor confidence and preserve India’s attractiveness as an investment destination. As India continues to emerge as a major global economy, finding the optimal balance between protecting tax revenues and encouraging foreign investment will remain a critical challenge for policymakers, courts, and tax administrators alike.

References

[1] Business Standard. (2025). SC backs revenue in Tiger Global case, allows India to tax Flipkart gains. Retrieved from https://www.business-standard.com/india-news/sc-backs-revenue-in-tiger-global-case-allows-india-to-tax-flipkart-gains-126011501137_1.html 

[2] Income Tax Department, Government of India. (1983). Convention between India and Mauritius for avoidance of double taxation. Retrieved from https://incometaxindia.gov.in/dtaa/108690000000000054.htm 

[3] TaxGuru. (2024). Case Study: India-Mauritius Double Taxation Avoidance Agreement (DTAA). Retrieved from https://taxguru.in/corporate-law/case-study-india-mauritius-double-taxation-avoidance-agreement-dtaa.html 

[4] TechCrunch. (2026). Tiger Global loses India tax case tied to Walmart-Flipkart deal in blow to offshore playbook. Retrieved from https://techcrunch.com/2026/01/15/tiger-global-loses-india-tax-case-tied-to-walmart-flipkart-deal-in-blow-to-offshore-playbook/ 

[5] TaxGuru. (2022). General Anti Avoidance Rules (GAAR): Application, Obligation, Implication. Retrieved from https://taxguru.in/income-tax/general-anti-avoidance-rules-gaar-application-obligation-implication.html 

[6] Business Standard. (2025). Supreme Court rejects Tiger Global’s tax plea in Flipkart stake sale case. Retrieved from https://www.business-standard.com/india-news/supreme-court-rejects-tiger-global-tax-plea-flipkart-stake-sale-case-126011500719_1.html 

[7] New Kerala. (2025). SC Rules Tiger Global’s Tax Structure Impermissible, Allows Revenue Appeals. Retrieved from https://www.newkerala.com/news/a/sc-rules-tiger-global-structure-impermissible-tax-avoidance-allows-600.htm 

[8] Outlook Business. (2025). Supreme Court Rules Tiger Global Must Pay Capital Gains Tax on 2018 Flipkart Stake Sale. Retrieved from https://www.outlookbusiness.com/news/supreme-court-rules-tiger-global-must-pay-capital-gains-tax-on-2018-flipkart-stake-sale 

[9] India Briefing. (2024). India-Mauritius DTAA Amendment Closes Tax Avoidance Loophole. Retrieved from https://www.india-briefing.com/news/india-mauritius-dtaa-amendment-addresses-tax-avoidance-loophole-32041.html/ 

The post Supreme Court’s Tiger Global Tax Case: Flipkart Stake Sale and Capital Gains Ruling appeared first on Bhatt & Joshi Associates.

Introduction

The taxation of cross-border service income has emerged as one of the most contentious issues in international tax jurisprudence. Within this broader debate, the interpretation of Fees for Technical Services under Double Taxation Avoidance Agreements has become particularly significant. The ‘make available’ clause represents a critical threshold test that determines whether payments made for technical services can be taxed in the source country. This principle, embedded within several of India’s tax treaties including the Indo-Singapore DTAA, has been the subject of extensive judicial scrutiny and has shaped the tax landscape for multinational service providers operating in India.

The fundamental question that courts have grappled with is straightforward yet profound: when does the provision of technical services cross the threshold from mere service delivery to actual technology transfer? This distinction carries substantial tax implications, as the answer determines whether the service provider’s income becomes taxable in India or remains taxable only in the country of residence. The Delhi High Court’s ruling in Commissioner of Income Tax v Bio-Rad Laboratories (Singapore) Pte Ltd represents a landmark interpretation of this principle, providing clarity on what constitutes technical services under the India-Singapore DTAA [1].

Legal Framework: Domestic Law and Treaty Provisions

Section 9(1)(vii) of the Income Tax Act, 1961

The Indian domestic law governing fees for technical services is embodied in Section 9(1)(vii) of the Income Tax Act, 1961. This provision deems income by way of fees for technical services to accrue or arise in India when such fees are payable by the Government, a resident person, or a non-resident in specific circumstances. The Explanation 2 to Section 9(1)(vii) defines fees for technical services as “any consideration (including any lump sum consideration) for the rendering of any managerial, technical or consultancy services (including the provision of services of technical or other personnel)” [2].

The domestic law definition is deliberately broad and encompasses managerial, technical, and consultancy services. However, it specifically excludes consideration for construction, assembly, mining, or similar projects, as well as amounts chargeable as salary income. The wide amplitude of this definition under domestic law stands in stark contrast to the more restrictive definitions found in many of India’s tax treaties, creating a hierarchy where treaty provisions often override domestic law pursuant to Section 90(2) of the Income Tax Act.

Article 12 of the India-Singapore DTAA

The India-Singapore DTAA, originally signed in 1994 and subsequently amended through protocols, contains specific provisions governing the taxation of royalties and fees for technical services under Article 12. The critical aspect of this treaty provision is the ‘make available’ clause embedded within Article 12(4)(b), which narrows the scope of taxable technical services considerably compared to the domestic law definition [3].

Article 12(4) of the India-Singapore DTAA defines fees for technical services as “payments of any kind to any person in consideration for services of a managerial, technical or consultancy nature (including the provision of such services through technical or other personnel)” provided such services make available technical knowledge, experience, skill, know-how, or processes to the person acquiring the services, or consist of the development and transfer of a technical plan or technical design. The protocol amendment of 2005 established that the tax rate on such fees, when taxable in India, shall not exceed 10 percent of the gross amount [4].

This ‘make available’ requirement creates a two-pronged test: first, whether the services involve technical knowledge, experience, or skill; and second, whether such technical elements are actually made available to the service recipient in a manner that enables independent future application. The burden of demonstrating that technical knowledge has been transferred rests on the tax authorities, and mere provision of services utilizing technical expertise does not automatically satisfy this test.

The ‘Make Available’ Principle: Judicial Interpretation

The De Beers Precedent

The foundational case establishing the interpretation of the ‘make available’ principle is the Karnataka High Court’s decision in CIT v De Beers India Minerals Pvt Ltd. In this case, the assessee had engaged a Netherlands-based company to conduct airborne geophysical surveys for diamond prospecting. The tax authorities contended that payments for these services constituted fees for technical services under Article 12(5) of the India-Netherlands DTAA, which contains a ‘make available’ clause similar to the India-Singapore treaty [5].

The Karnataka High Court held that for technical knowledge to be ‘made available,’ the mere provision of services is insufficient. The court emphasized that the recipient must be enabled to apply the technology independently in the future without continued assistance from the service provider. The court observed that while the Dutch company had performed surveys using substantial technical skills and expertise, it had not made available the technical knowledge regarding data collection or processing to the assessee. The assessee could not independently undertake such surveys in the future without engaging similar technical experts again, which demonstrated that no technology transfer had occurred [6].

This decision established that the ‘make available’ test requires more than temporary access to technical expertise during service delivery. It requires an enduring transfer of capability that allows the service recipient to replicate the technical work independently. The distinction is between ‘use of’ technical knowledge by the service provider and ‘transfer of’ technical knowledge to the service recipient.

Bio-Rad Laboratories Case: Application to Management Services

The Delhi High Court’s decision in Commissioner of Income Tax v Bio-Rad Laboratories (Singapore) Pte Ltd involved a Singapore entity providing IT and administrative support services to its Indian affiliate. The Assessing Officer had characterized these services as ‘management support services’ and sought to tax them at 10 percent under the India-Singapore DTAA. The services included professional advice through studies, evaluations, report reviews, liaison work, advice on policy issues, business operations, HR management, and financial management [7].

The Income Tax Appellate Tribunal ruled in favor of the taxpayer, concluding that the services did not satisfy the ‘make available’ criterion under Article 12(4)(b) of the India-Singapore DTAA. The tribunal reasoned that if technical knowledge, experience, and skills had genuinely been made available to the Indian affiliate, the service agreement would not have continued from January 1, 2010, through multiple years. The continuous nature of the service arrangement itself evidenced that no independent capability had been transferred to the Indian entity [8].

The Delhi High Court upheld this reasoning, observing that the provision of advisory services, even when involving technical or managerial expertise, does not automatically constitute fees for technical services under the treaty. The court emphasized that the critical inquiry is whether the Indian entity acquired the ability to independently perform similar functions in the future. Since the Indian affiliate remained dependent on continued service provision from the Singapore entity, no technology transfer had occurred within the meaning of the treaty provision.

Regulatory Framework and Tax Treatment

Tax Deduction at Source Requirements

Under Section 195 of the Income Tax Act, 1961, any person responsible for paying to a non-resident any sum chargeable to tax must deduct income tax at the applicable rates. When payments qualify as fees for technical services under domestic law or treaty provisions, the payer bears the responsibility for deducting tax at source. Failure to deduct or deposit such tax exposes the payer to liability under Section 201 for tax default and interest charges under Section 201(1A) [9].

However, when treaty provisions apply and establish that payments do not constitute fees for technical services, the obligation to deduct tax at source may not arise at all. This creates significant compliance considerations for Indian entities making payments to non-residents, as incorrect characterization can lead to substantial tax liabilities, penalties, and interest costs. The determination of whether the ‘make available’ test is satisfied thus carries direct consequences for withholding tax obligations.

Rate of Taxation and Treaty Benefits

When fees for technical services are determined to be taxable under the India-Singapore DTAA, Article 12(2) limits the tax rate to 10 percent of the gross amount, provided the recipient is the beneficial owner of the fees. This represents a preferential rate compared to the domestic law rate, which could potentially be higher. The protocol amending the India-Singapore DTAA, which came into force on August 1, 2005, specifically modified Article 12 to establish this maximum rate [4].

To claim treaty benefits, the non-resident service provider must obtain and furnish a Tax Residency Certificate from the government of Singapore along with Form 10F, which provides prescribed details about the taxpayer. These documentary requirements serve as gatekeeping mechanisms to prevent treaty shopping and ensure that only genuine residents of treaty partner countries can access preferential treaty rates.

Comparative Analysis: Other Tax Treaties with ‘Make Available’ Clauses

The ‘make available’ clause is not unique to the India-Singapore DTAA. India has incorporated similar provisions in tax treaties with several countries including the United States, United Kingdom, Canada, Australia, Netherlands, and others. The interpretation of this clause has developed through a body of jurisprudence examining payments under different treaty frameworks, creating a relatively consistent judicial approach across treaties.

The Memorandum of Understanding to the India-US DTAA provides helpful guidance on the ‘make available’ concept, stating that technology will generally be considered made available when the person acquiring the service is enabled to apply the technology. The MoU clarifies that the fact that provision of the service may require technical input by the service provider does not per se mean that technical knowledge has been made available to the service purchaser [5].

This guidance has been applied by Indian tribunals and courts in interpreting similar clauses in other tax treaties, creating a degree of harmonization in the application of the principle across India’s treaty network. The underlying policy rationale is consistent: to distinguish between pure service transactions and genuine technology transfer arrangements that justify source country taxation rights.

Contemporary Relevance and Recent Developments

Recent tribunal decisions continue to refine the application of the ‘make available’ principle to contemporary business arrangements. The Delhi ITAT’s ruling in Criteo Singapore examined digital services including data center services, advertisement space services, and business support services. The tribunal held that these services did not make available any technical knowledge to the Indian entity and therefore were not taxable as fees for technical services under the India-Singapore DTAA [2].

Similarly, the Mumbai ITAT’s recent decision in CA(Singapore) PTE Ltd v ACIT clarified that ancillary software support services, even when billed separately from software licenses, do not constitute fees for technical services when the ‘make available’ requirement is not satisfied. The tribunal deleted a tax addition of Rs. 48.27 crore, emphasizing that support services that merely assist in software usage without transferring underlying technical knowledge fall outside the scope of taxable technical services [9].

These decisions reflect the evolving nature of service delivery in the digital economy and the courts’ consistent adherence to substance over form in applying the ‘make available’ test. The principle continues to provide taxpayer-friendly outcomes in cases involving routine business support, management consulting, and technical assistance that does not involve genuine knowledge transfer.

Conclusion

The ‘make available’ principle represents a critical limitation on source country taxation rights for technical services under India’s tax treaty network. The judicial interpretation developed through cases like De Beers and Bio-Rad Laboratories establishes that mere provision of services utilizing technical expertise does not constitute taxable fees for technical services when no enduring transfer of technical capability occurs. This principle protects multinational service providers from taxation on routine support services while preserving India’s right to tax genuine technology transfer arrangements.

For multinational enterprises operating in India, understanding the ‘make available’ test is essential for tax planning and compliance. Service arrangements should be structured and documented with careful attention to whether technical knowledge is being transferred or merely applied. The continuous dependence on the service provider, the nature of deliverables, and the recipient’s ability to independently replicate the services all serve as factual indicators that courts examine in applying this principle.

As cross-border service delivery continues to evolve, particularly in digital and technology sectors, the ‘make available’ principle will remain a cornerstone of international tax jurisprudence, balancing the legitimate taxation interests of source countries against the need to avoid double taxation of routine commercial services.

References

[1] LiveLaw. (2023, October 29). IT And Admin Services By Singapore Entity To Its Affiliate In India Can’t Be FTS: Delhi High Court. Retrieved from https://www.livelaw.in/high-court/delhi-high-court/it-and-admin-services-by-singapore-entity-to-its-affiliate-in-india-cant-be-fts-delhi-high-court-240864 

[2] Meta Legal. (2025, April 29). Delhi ITAT on Digital Services Tax Under India-Singapore DTAA. Retrieved from https://www.metalegal.in/post/delhi-itat-clarifies-on-taxability-of-digital-services-under-india-singapore-dtaa 

[3] Income Tax India. (n.d.). Singapore Comprehensive Agreements – India-Singapore DTAA. Retrieved from https://incometaxindia.gov.in/DTAA/108690000000000077.htm 

[4] Inland Revenue Authority of Singapore. (2011). Protocol Amending Singapore-India DTA (Ratified). Retrieved from https://www.iras.gov.sg/media/docs/default-source/dtas/protocol-amending-singapore-india-dta-(ratified)(mli)(1-oct-2019).pdf?sfvrsn=dd28a790_0 

[5] Indian Kanoon. (2007, February 2). Income Tax Officer vs De Beers India Minerals Pvt. Ltd. Retrieved from https://indiankanoon.org/doc/575153/ 

[6] The Laws. (2012, March 15). Commissioner of Income Tax vs. De Beers India Minerals (P.) Ltd. Retrieved from https://www.the-laws.com/Encyclopedia/browse/Case?caseId=012102074100 

[7] SCC Online. (2023, November 2). IT and Administrative Services provided by Singapore Entity to its Indian affiliate cannot be construed as FTS: Delhi HC. Retrieved from https://www.scconline.com/blog/post/2023/11/01/delhi-hc-it-and-administrative-services-provided-by-singapore-entity-to-its-indian-affiliate-cannot-be-construed-as-fts-legal-news/ 

[8] TaxGuru. (2023, November 17). IT & Admin Services to Indian Affiliate by Singapore Entity Not FTS: Delhi HC. Retrieved from https://taxguru.in/income-tax/it-admin-services-indian-affiliate-singapore-entity-fts-delhi-hc.html 

[9] Taxscan. (2024, December 25). Ancillary Software Support Not a Fee for Technical Services: ITAT Drops ₹48.27 Cr Income Tax Addition Under India-Singapore DTAA. Retrieved from https://www.taxscan.in/top-stories/ancillary-software-support-not-a-fee-for-technical-services-itat-drops-4827-cr-income-tax-addition-under-india-singapore-dtaa-1440778 

Published and Authorized by Vishal Davda 

The post The ‘Make Available’ Principle in DTAA: Tax Implications and Analysis of the Indo-Singapore Agreement appeared first on Bhatt & Joshi Associates.

In today’s interconnected global economy, the phenomenon of double taxation presents significant challenges to international trade and investment. Double taxation occurs when the same income is subjected to taxation by two or more countries, creating an unfair burden on taxpayers and hindering cross-border economic activities. To address this challenge, countries worldwide have developed Double Taxation Avoidance Agreements (DTAAs), which serve as bilateral or multilateral treaties designed to eliminate or reduce instances of double taxation.

The concept of Double Taxation Avoidance Agreements (DTAAs) emerged from the recognition that unrestricted double taxation could severely impede international commerce and economic growth. These agreements establish clear frameworks for determining which country has the primary right to tax specific types of income, thereby providing certainty and fairness to taxpayers engaged in cross-border transactions. The fundamental principle underlying DTAAs is the allocation of taxing rights between the source country (where income is generated) and the residence country (where the taxpayer is domiciled), ensuring that income is not subjected to excessive taxation in multiple jurisdictions.

India, as a rapidly growing economy with substantial foreign investment flows and a significant diaspora, has recognized the critical importance of DTAAs in fostering international economic cooperation. The country has systematically pursued an extensive network of tax treaties, demonstrating its commitment to creating a favorable environment for international business and investment. Currently, India maintains comprehensive DTAAs with over 94 countries [1], reflecting its strategic approach to international taxation and economic diplomacy.

BHATT & JOSHI ASSOCIATES INCOME TAX LAWYERS

Legal Framework Governing Double Taxation Avoidance Agreements in India

The legal foundation for DTAAs in India is established under the Income Tax Act, 1961, specifically through Sections 90, 90A, and 91. These provisions empower the Central Government to enter into agreements with foreign countries and specified associations to provide relief from double taxation. Section 90 of the Income Tax Act provides the primary authority for the Central Government to negotiate and implement DTAAs with foreign countries or specified territories [2].

Under Section 90, the Central Government is empowered to enter into agreements with any foreign government for the following purposes: granting relief from double taxation of income under the laws of both countries; avoidance of double taxation; and facilitating the exchange of information for the prevention of tax evasion. The section explicitly states that where a DTAA provides for more beneficial treatment than the provisions of the Income Tax Act, the taxpayer may opt for the more favorable provision [3].

Section 90A extends this framework to agreements between specified associations in India and their foreign counterparts. This provision recognizes the importance of institutional cooperation in international taxation matters and provides a mechanism for relief from double taxation even when formal government-to-government agreements may not exist.

Section 91 addresses situations where no formal DTAA exists between India and another country. This unilateral relief provision ensures that Indian residents are not unduly burdened by double taxation even in the absence of bilateral agreements. Under Section 91, relief is granted up to the amount of Indian tax attributable to such income or the amount of foreign tax paid, whichever is lower [4].

Analysis of the India-UAE DTAA Framework

The Double Taxation Avoidance Agreement between India and the United Arab Emirates, signed in 1992 and effective from September 22, 1993, represents a significant milestone in bilateral economic cooperation [5]. This agreement follows the structure of international tax treaty models while incorporating specific provisions tailored to the economic relationship between the two countries.

Scope and Coverage of the India-UAE DTAA

The India-UAE DTAA covers various forms of taxes imposed by both countries, including income tax, wealth tax, and capital gains tax. Article 2 of the agreement defines the scope of covered taxes, ensuring comprehensive protection against double taxation across multiple categories of income and wealth [6]. The agreement applies to residents of both contracting states and covers various sources of income including business profits, dividends, interest, royalties, capital gains, and income from immovable property.

Business Profits and Permanent Establishment

One of the most significant aspects of the India-UAE DTAA is its treatment of business profits and the concept of permanent establishment. Article 7 of the agreement governs the taxation of business profits, establishing that the profits of an enterprise of one contracting state are taxable only in that state unless the enterprise carries on business in the other contracting state through a permanent establishment situated therein.

The definition of permanent establishment under Article 5 of the India-UAE DTAA follows international standards while providing specific inclusions and exclusions. The agreement defines permanent establishment as “a fixed place of business through which the business of an enterprise is wholly or partly carried on.” This definition includes specifically enumerated examples such as places of management, branches, offices, factories, workshops, mines, oil or gas wells, quarries, farms, plantations, and building sites or construction projects lasting more than nine months.

The judicial interpretation of permanent establishment has been clarified in landmark cases. In CIT v. Vishakhapatnam Port Trust [(1983) 144 ITR 146 (AP)], the Andhra Pradesh High Court observed that “permanent establishment” postulates the existence of a substantial element of an enduring or permanent nature of a foreign enterprise in another country, which can be attributed to a fixed place of business in that country [7].

Treatment of Fees for Technical Services

A distinctive feature of the India-UAE DTAA is the absence of a specific provision dealing with fees for technical services (FTS). Unlike many other Double Taxation Avoidance Agreements (DTAAs) that India has concluded, the India-UAE agreement does not contain a dedicated article addressing the taxation of technical service fees. This omission is not accidental but represents a deliberate mutual agreement between the contracting states.

The absence of specific FTS provisions means that payments for technical services must be classified under other articles of the agreement. Such payments typically fall under Article 7 (Business Profits), Article 14 (Independent Personal Services), or Article 22 (Other Income), depending on the specific circumstances of the service provision and the relationship between the parties.

In cases where technical service fees cannot be attributed to a permanent establishment or fixed base, such income is generally treated as business profits taxable only in the state of residence of the service provider. This treatment has been consistently upheld by Indian tax authorities and tribunals in various decisions.

Independent Personal Services and Other Income

Article 14 of the India-UAE DTAA addresses the taxation of income derived from independent personal services. Under this provision, income derived by a resident of one contracting state in respect of professional services or other activities of an independent character is taxable only in that state, except in specific circumstances. These exceptions include situations where the individual has a fixed base regularly available in the other contracting state or where the stay in the other state exceeds 183 days in the relevant tax year.

The scope of “independent personal services” under Article 14 has been subject to interpretation by tax authorities and courts. The provision covers various professional activities including consultancy services, advisory services, and other similar independent activities. However, it is important to distinguish between independent personal services and dependent personal services, which are governed by Article 15 of the agreement.

Article 22 of the India-UAE DTAA serves as a residual provision covering “Other Income” not specifically dealt with in other articles of the agreement. Under this article, items of income of a resident of one contracting state that are not expressly covered elsewhere in the agreement are taxable only in the state of residence.

Capital Gains Taxation

Article 13 of the India-UAE DTAA provides comprehensive rules for the taxation of capital gains arising from the alienation of various types of property. The article establishes different treatment for different categories of assets, reflecting the principle that capital gains should generally be taxed in the country where the underlying asset is located or where the entity being disposed of has its primary economic substance.

Under Article 13, gains from the alienation of immovable property situated in one contracting state may be taxed in that state. Similarly, gains from the alienation of shares deriving their value principally from immovable property situated in one contracting state may be taxed in that state. For other types of property, including movable property forming part of the business property of a permanent establishment, gains are generally taxable in the state where the property is situated or the permanent establishment is located.

Regulatory Compliance and Implementation

The implementation of DTAA benefits requires strict compliance with prescribed procedures and documentation requirements. Taxpayers seeking to claim DTAA benefits must satisfy specific conditions and provide necessary documentation to substantiate their claims.

Tax Residency Certificate and Form 10F

To claim benefits under the India-UAE DTAA, taxpayers must obtain a Tax Residency Certificate (TRC) from the tax authorities of their country of residence. The TRC serves as conclusive proof of the taxpayer’s tax residency status and is mandatory for claiming treaty benefits in India. The certificate must be obtained for each financial year in which treaty benefits are claimed and must contain specific information as prescribed by Indian tax authorities.

In addition to the TRC, taxpayers may be required to file Form 10F electronically, providing detailed information about their residency status, income sources, and other relevant particulars. Form 10F serves as a declaration of the taxpayer’s eligibility for treaty benefits and helps tax authorities verify the legitimacy of claims.

Foreign Tax Credit Mechanism

The India-UAE DTAA provides for relief from double taxation through the foreign tax credit mechanism outlined in Article 25. Under this provision, Indian residents who earn income in the UAE and pay tax thereon may claim credit for the UAE tax paid against their Indian tax liability on the same income. Similarly, UAE residents paying tax in India may claim credit for such Indian tax against their UAE tax obligations.

The foreign tax credit is subject to certain limitations and conditions. The credit allowable cannot exceed the Indian tax attributable to such income computed before allowing the credit. The computation requires careful allocation of income and taxes to ensure proper relief while preventing excessive credit claims.

Recent Judicial Developments and Interpretations

Recent judicial decisions have provided important clarifications on the interpretation and application of DTAA provisions, particularly in the context of the India-UAE agreement. Courts have consistently emphasized the importance of proper classification of income and the application of appropriate treaty articles.

In the context of technical services, tribunals have held that in the absence of specific FTS provisions in a DTAA, such services must be evaluated under other applicable articles. The Income Tax Appellate Tribunal has observed that payments for technical services should be analyzed under business profits provisions when no specific technical services article exists in the relevant DTAA.

The Delhi High Court has also provided significant guidance on the classification of services under DTAA provisions. In cases involving UAE entities providing various services to Indian companies, courts have emphasized the need to properly classify income under appropriate DTAA articles, whether as business profits, independent personal services, or other income, depending on the specific facts and circumstances.

Challenges and Planning Opportunities

The India-UAE DTAA, while providing substantial benefits for cross-border economic activities, also presents certain challenges and planning opportunities that taxpayers and advisors must carefully consider.

Substance Requirements and Anti-Avoidance Measures

Recent developments in international taxation have introduced enhanced substance requirements and anti-avoidance measures that impact the application of DTAA benefits. Taxpayers must demonstrate genuine business substance in their country of residence to qualify for treaty benefits. This includes maintaining adequate physical presence, conducting real business activities, and demonstrating economic substance beyond mere tax planning considerations.

The Principal Purpose Test (PPT) and other anti-treaty shopping measures are increasingly being incorporated into tax treaties, including through the Multilateral Instrument (MLI) that India has signed. These measures require taxpayers to demonstrate that obtaining treaty benefits was not the principal purpose of their arrangements or transactions.

Documentation and Compliance Requirements

Proper documentation and compliance with procedural requirements are essential for successfully claiming DTAA benefits. This includes maintaining comprehensive records of income sources, tax payments, business activities, and residency status. Failure to meet documentation requirements can result in denial of treaty benefits and potential disputes with tax authorities.

Taxpayers must also be aware of specific deadlines and procedures for claiming treaty benefits, including the filing of required forms and certificates within prescribed time limits. Late submissions or incomplete documentation can jeopardize the availability of treaty relief.

Future Developments and Trends

The landscape of international taxation and DTAA application continues to evolve with changing global economic conditions and regulatory developments. Several trends are likely to impact the India-UAE DTAA and similar agreements in the coming years.

Digital Economy and Nexus Rules

The digitalization of the global economy presents new challenges for traditional DTAA concepts such as permanent establishment and source rules. International efforts to address the taxation of digital services and the digital economy may result in modifications to existing treaties or the development of new rules for digital nexus and profit attribution.

Enhanced Information Exchange and Transparency

The global push for tax transparency and automatic exchange of information is likely to continue, with implications for DTAA implementation and compliance. Enhanced reporting requirements and information sharing between tax authorities will increase the importance of proper documentation and compliance with treaty requirements.

BEPS Implementation and MLI

The implementation of Base Erosion and Profit Shifting (BEPS) recommendations through the Multilateral Instrument and bilateral treaty modifications will continue to impact DTAA application. Anti-avoidance measures, enhanced dispute resolution procedures, and revised PE definitions are among the changes that may affect the India-UAE DTAA and similar agreements.

Conclusion

The Double Taxation Avoidance Agreement between India and the UAE represents a crucial framework for promoting bilateral economic cooperation while providing essential protection against double taxation. The agreement’s comprehensive coverage of various income types, clear allocation of taxing rights, and provision for mutual cooperation in tax matters have contributed significantly to the growth of economic ties between the two countries.

The absence of specific technical services provisions in the India-UAE DTAA requires careful analysis and proper classification of income under other applicable articles. Taxpayers must ensure compliance with all procedural requirements and maintain adequate documentation to successfully claim treaty benefits.

As the international tax landscape continues to evolve, staying informed about regulatory developments, judicial interpretations, and compliance requirements remains essential for taxpayers and advisors dealing with India-UAE cross-border transactions. The continued effectiveness of the DTAA framework depends on proper implementation, adequate compliance measures, and adaptation to changing global economic conditions.

The India-UAE DTAA serves as an excellent example of how bilateral tax treaties can facilitate international economic cooperation while ensuring fair and efficient taxation of cross-border income. Its provisions continue to support growing economic ties between India and the UAE, contributing to increased trade, investment, and economic development in both countries.

References

[1] Income Tax Department, Government of India. “Double Taxation Avoidance Agreements.” Available at: https://incometaxindia.gov.in/pages/international-taxation/dtaa.aspx 

[2] Income Tax Act, 1961, Section 90. Available at: https://cleartax.in/s/section-90-90a-91-of-income-tax-act 

[3] IndiaFilings. “Double Taxation Relief – Sections 90, 90A, and 91 of the Income Tax Act.” Available at: https://www.indiafilings.com/learn/double-taxation-relief/ 

[4] Tax2win. “Relief Under Section 90/90A/91 of Income Tax Act.” Available at: https://tax2win.in/guide/relief-under-section-90-90a-91 

[5] ClearTax. “Double Tax Avoidance Agreement (DTAA) Between India and UAE.” Available at: https://cleartax.in/s/india-uae-dtaa 

[6] Tax2win. “Understanding DTAA Between India and UAE.” Available at: https://tax2win.in/guide/dtaa-between-india-and-uae 

[7] CIT v. Vishakhapatnam Port Trust (1983) 144 ITR 146 (AP)

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