Cairn Energy wins arbitration case over tax claim against Indian govt

In a second case after Vodafone, tribunal says India’s tax claim in past taxes over a 2006-07 internal reorganization of Cairn’s India business was not a valid demand

An arbitration panel had in December ordered the Indian government to return USD 1.2 billion plus interest and penalty to Cairn Energy after reversing a retrospective tax demand. File Photo

British Cairn Energy Plc has won an arbitration award in a tax dispute case with the Indian government, in yet another blow to the government after a similar case by Vodafone Group Plc.

An international arbitration tribunal ruled that India’s tax claim of ₹10,247 crore in past taxes over a 2006-07 internal reorganization of Cairn’s India business was not a valid demand, media reports said.

The Indian government allegedly denied Cairn its share of dividend. Besides, the income tax department liquidated a portion of the residual shares that the company had in Cairn India after its merger with Vedanta.

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The tribunal has also told India to refund the share withheld along with the interest to the Scottish oil explorer for seizing dividend, tax refund and sale of shares to partly recover the dues.

The government is yet to comment on the ruling, though it can appeal against the tribunal’s verdict.

Also read: ₹ 20,000-crore tax demand: Govt to challenge Vodafone’s victory in court

The Cairn Energy’s victory will be a second loss for India after Vodafone Group Plc won a years-long tax dispute with the government in September over a controversial $3 billion tax demand. Unlike in the Vodafone case, the government will have to repay Cairn. India in 2012 retrospectively amended the tax code, giving itself the power to go after M&A deals back to 1962 if the assets were in India, Bloomberg reported.

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