Delhi high court on Tuesday stayed any tax assessment against Tiger Global on the Flipkart exit till January 18. The tax department has 10 weeks to file a counter affidavit, according to a ruling by a division bench of Justice Manmohan and Justice Sanjeev Narula.
The tax department aimed to start tax assessment proceedings against the US-PE firm after an Authority of Advanced Rulings (AAR) order that had denied it India-Mauritius treaty benefits.
The US-based private equity firm had moved the high court on Monday as it believed that there is enough substance and decision making in the deal structure to get India-Mauritius treaty benefits. It said AAR had not gone into all the aspects of the deal before denying it treaty benefits. AAR had in June 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, as its firms that made the Flipkart investment were based in Mauritius were set up before 2017. AAR ruled that they suspect the tax treaty is being abused to avoid tax. The matter pertains to the exit by Mauritius-based entities that were part of Tiger Global. These entities had sold their stakes in Flipkart Singapore to a Luxembourg-based company for over ₹14,500 crore and had sought an advance ruling for zero withholding tax.