The Supreme Court’s ruling on the taxability of capital gains arising from Tiger Global’s exit from Flipkart is significant not merely for what it decides, but for what it says about India’s evolving relationship with global capital. Justice J.B. Pardiwala’s concurring opinion goes well beyond the facts of one transaction to articulate a broader philosophy: that tax treaties are instruments of national policy, not concessions to external pressure. In an era when cross-border capital flows are vast, mobile, and often opaque, the court has reaffirmed a foundational principle—that India’s right to tax value created within its borders is an essential element of its sovereignty. This assertion matters because international tax treaties have too often been treated as technical or diplomatic exercises, insulated from democratic scrutiny. The judgment reminds us that such treaties shape real outcomes: who pays tax, who does not, and ultimately who bears the burden of financing the state.
For decades, the dominant global narrative encouraged developing economies to sign expansive tax treaties, often with limited safeguards, in the belief that generous tax treatment would attract investment and accelerate growth. The experience has been mixed. While foreign capital has flowed in, so too have complex corporate structures designed to minimise tax liability through treaty shopping and regulatory arbitrage. Shell entities, conduit jurisdictions, and paper reorganisations have allowed profits generated from Indian markets to be booked elsewhere, eroding the domestic tax base. The Flipkart transaction brought this tension into sharp focus. The value realised by early investors was built on Indian consumers, Indian labour, and an ecosystem supported by Indian laws and infrastructure. To suggest that such gains should escape Indian taxation because of treaty arrangements would be to sever taxation from economic reality. By upholding the revenue authorities’ position, the court has aligned legal interpretation with the principle that taxation must follow value creation.
Justice Pardiwala’s opinion is especially notable for situating tax policy within a wider framework of public interest and democratic control. His emphasis on limitation of benefits clauses, the applicability of domestic anti-avoidance rules such as the General Anti-Avoidance Rule, and the need for periodic review and renegotiation of treaties reflects a global rethinking already underway. From the OECD’s Base Erosion and Profit Shifting initiative to the push for a global minimum corporate tax, there is growing recognition that unrestrained tax competition undermines both revenue and trust in institutions. Yet the Indian court goes a step further by warning against the loss of strategic autonomy and democratic oversight. Tax revenue is not an abstract accounting entry; it underwrites public services, infrastructure, and social welfare. When treaties unduly constrain a state’s ability to tax, they weaken the social contract itself. Seen in this light, safeguarding tax sovereignty is not protectionism—it is a prerequisite for sustainable development.
Concerns will inevitably be raised about investor confidence. Predictability and stability are legitimate requirements for any investment climate, and abrupt or arbitrary changes can be damaging. But predictability should not be confused with the permanence of inequity. A transparent framework that clearly states India’s tax expectations, applies them consistently, and allows for renegotiation when circumstances change is more credible than one riddled with loopholes and litigation. The Supreme Court’s guidance points towards such a framework—one that balances openness to investment with fairness in taxation. As India seeks to position itself as a major economic power in a fragmented global order, it will face pressure to dilute its tax claims in the name of competitiveness. The judgment serves as a timely reminder that long-term credibility lies not in yielding to pressure, but in asserting clear, principled rules. If policymakers internalise this message, the Tiger Global ruling may come to be seen not just as a tax decision, but as a marker of India’s confidence in shaping global economic engagement on its own terms.