Cairn Energy has won an international arbitration case against the Indian government over a tax dispute, ending one of the most high profile disputes in the country, two sources with direct knowledge of the matter told Reuters.
Cairn in March 2015 filed a formal dispute against a demand for more than $1.6 billion from the Indian tax department that dates back to the 2007 listing of its then Indian operation.
The Indian government did not immediately respond to a request for comment. Cairn Energy could not be reached.
The company, which gave the country its biggest oil discovery, received a notice from the income tax department in January 2014, requesting information related to the group reorganisation done in 2006. Alongside, the department attached the company’s near 10 per cent shareholding in its erstwhile subsidiary, Cairn India. In March 2015, the tax department sought Rs 10,247 crore in taxes on alleged capital gains made by the company in the internal reorganisation.
Cairn Energy had in 2010-11 sold Cairn India to Vedanta. 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 issued together with preference shares.
In addition to attaching its shares in Vedanta, the tax department seized dividends totalling Rs 1,140 crore due to it from those shareholdings and set off a Rs 1,590-crore tax refund against the demand. Cairn Energy in 2015 initiated an international arbitration to challenge retrospective taxation.
Pending final award, the tax department sold Cairn Energy’s shares in Vedanta to recover part of the tax demand. It had previously stated that the arbitration panel is expected to issue a binding and internationally-enforceable award.
(With inputs from PTI)
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