Global investors seek JAAR relief for grandfathered shares

International investors have asked Indian tax authorities to address the use of the judicial anti-avoidance rule, or JAAR, to deny tax relief on shares acquired before April 1, 2017. The Economic Times reported on October 18 that investors belonging to the Asia Securities Industry & Financial Markets Association (ASIFMA) met Central Board of Direct Taxes (CBDT) officials about a week earlier, citing two people familiar with the meeting.

The dispute follows the reported rejection of tax benefits claimed by at least three Mauritius investors on sales of these “grandfathered” shares. Investors are seeking government intervention, arguing that applying JAAR undermines the protection extended to older investments.

Why the grandfathering protection is disputed

Under the amended India-Mauritius tax treaty, gains from the sale of grandfathered shares are exempt from capital gains tax, according to the report. In March, CBDT also clarified that gains on such sales would not be affected by the General Anti-Avoidance Rules, or GAAR.

Tax officials have used GAAR to refuse treaty benefits where they suspected that an investor’s entity in a treaty jurisdiction, such as Mauritius or Singapore, lacked commercial substance. The investors’ argument is that GAAR and JAAR serve a similar anti-abuse purpose: challenging artificial arrangements used to obtain tax advantages.

A person familiar with the discussions said investors therefore considered the use of JAAR on grandfathered shares a step backwards after CBDT had excluded those transactions from GAAR. That is the investors’ position on the scope of the protection, rather than a settled legal conclusion.

Why a circular may not resolve the issue

The legal obstacle, according to the report, is the Supreme Court’s January 2026 decision concerning American investment firm Tiger Global. The court held that tax authorities could invoke GAAR and JAAR either together or separately.

Sources described CBDT’s position as favouring a change in law if transactions protected from GAAR are also to be insulated from JAAR. A senior tax professional said investors had been told that extending such protection through an executive decision could be interpreted as conflicting with the Supreme Court’s ruling.

One person familiar with the meeting said a CBDT circular could consequently face legal hurdles, making a legislative amendment a matter for the government to consider. The report does not identify an announced amendment or a final resolution of the investors’ request.

Two distinct routes to challenge tax arrangements

GAAR is a codified legal framework, while JAAR derives from judicial decisions. The report puts the threshold for GAAR’s application at tax benefits exceeding ₹3 crore.

The request concerns the treatment of older investments, not a general exemption from anti-abuse scrutiny. For the multinational companies, private equity firms and venture capital funds affected, the immediate question is whether the existing grandfathering protection is sufficient—or whether Parliament must clarify its reach.