Cairn Energy expects arbitration award on retrospective tax soon
New Delhi, July 22 (IANS) Scottish oil firm Cairn Energy has pinned its hopes on a favourable order from the arbitration panel by the end of summer over its tax dispute in India where it has challenged the government for seeking Rs 10,247 crore in retrospective taxes from the oil explorer.
“The Arbitration Tribunal has indicated that while it has encountered some difficulties created by the Covid-19 pandemic, it does not expect significant delays and hopes to remain reasonably within the lead-time it had anticipated,” Cairn said in a statement.
Cairn Energy has sought arbitration under the India-UK bilateral investment protection treaty. The three-member arbitration tribunal is based in The Hague and final hearings on the matter were completed in December 2018. The tribunal was supposed to give an award by February 2019. But in March 2019, it delayed it to 2019-end and then to the summer of 2020.
“While it is not yet able to commit to a specific date for its ruling, it expects a “release of the Award after the end of the summer,” Cairn said. Summer in Europe is between June-August, so the company expects an order next month or early September.
“Cairn continues to have a high level of confidence in the arbitration and is seeking full restitution for losses of more than $1.4 billion,” the company statement said.
In 2014, the IT department had slapped the tax demand on Cairn Energy saying the company made capital gains of Rs 24,503.50 crore in 2006 when it transferred all its India assets to a new company, Cairn India.
The company was subsequently listed on the stock exchanges. In 2011, Cairn Energy sold a majority stake in its Indian unit to mining group Vedanta for $8.67 billion.
Following 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 per cent in Vedanta.
Citing capital gains and taking retrospective tax cover, the IT department moved ahead on its tax demand by attaching Cairn’s shares in Vedanta, and also seizing dividends totalling Rs 1,140 crore due to it from those shareholdings.
Cairn Energy in 2015 initiated an international arbitration to challenge retrospective taxation.
Pending the final award, the tax department sold Cairn Energy’s shares in Vedanta to recover part of the tax demand.
–IANS
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