India Asked to Pay $1.2 Bn As Cairn Energy Wins Tax Dispute Case

In 2015, Cairn had initiated an international arbitration to challenge retrospective taxation.

British energy major Cairn Energy on Wednesday, 23 December, won an international arbitration case against the Indian government over a tax dispute.

(Photo: The Quint)

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British energy major Cairn Energy on Wednesday, 23 December, won an international arbitration case against the Indian government over a tax dispute.

The setback for India comes after Vodafone Group Plc in September won an international arbitration case against the government.

The Case

Cairn Energy had in 2010-11 sold Cairn India to Vedanta. Post the merger of Cairn India and Vedanta in April 2017, the UK firm's shareholding in Cairn India was replaced by a shareholding of about 5 percent in Vedanta, issued together with preference shares, according to IANS.

Along with attaching its shares in Vedanta, the tax department seized dividends of around Rs 1,140 crore due to it from the shareholdings and set-off a Rs 1,590 crore tax refund against the demand.

In 2015, Cairn initiated an international arbitration to challenge retrospective taxation.

Cairn’s claim was brought under the terms of the UK-India Bilateral Investment Treaty, the legal seat of the tribunal was the Netherlands and the proceedings were under the registry of the Permanent Court of Arbitration, IANS reported.

The Ruling

The international tribunal ruled that India's tax claim of Rs 10,247 crore in past taxes over internal reorganisation of Cairn's India business was not a valid demand.

What Cairn Said After Verdict

After the ruling, Cairn said that the tribunal has awarded damages of $1.2 billion along with interest and costs.

“The tribunal ruled unanimously that India had breached its obligations to Cairn under the UK-India Bilateral Investment Treaty and has awarded to Cairn damages of $1.2billion plus interest and costs, which now becomes payable,” it said.

What Indian Govt Said After Ruling

The Centre said it will consider further action and that it is consulting with its counsels.

“The government will be studying the award and all its aspects carefully in consultation with its counsels. After such consultations, the government will consider all options and take a decision on further course of action, including legal remedies before appropriate fora,” the finance ministry said in a statement.

(With inputs from IANS.)