Govt to contest Cairn award, fits in worldwide courts

The authorities is learnt to have determined to file an attraction towards the $1.2-billion arbitration award within the retrospective tax demand case involving Cairn Energy. Following Cairn Energy chief government officer Simon Thomson’s assembly with Finance Secretary Ajay Bhushan Pandey for the second consecutive day on Friday, authorities sources indicated that the Centre may even contemplate contesting different fits filed by the corporate at varied worldwide courts.
Company sources, in the meantime, indicated that the problem of attraction was not mentioned within the assembly.
“The government will file an appeal against Cairn arbitration award soon and will contest its sovereign rights to tax. It will also strongly contest other suits filed by Cairn Energy at various other international courts,” an official mentioned.
The authorities has welcomed Cairn’s transfer to succeed in out for a decision. However, it’s of the view that any dispute decision to be sought by Cairn should be “within the already existing laws”, the official mentioned.
After Friday’s assembly, Thomson mentioned it was a “constructive” interplay. The firm is hoping for a constructive decision, a supply near the entity mentioned. “It was a very constructive discussion and there was no discussion on whether the government would appeal in the Cairn retrospective tax demand case. However, it was a constructive discussion and we are looking forward to a solution,” the supply mentioned.
Queries despatched by The Indian Express to the Finance Ministry on the problem went unanswered.
Thomson had earlier met Pandey on Thursday to debate the best way ahead with respect to the arbitration award by the Permanent Court of Arbitration (PCA) at The Hague in December 2020. The court docket had dominated that the federal government’s retrospective tax demand on Cairn Energy was “in breach of the guarantee of fair and equitable treatment”, and towards the India-UK bilateral treaty.
He had earlier sought a gathering with Finance Minister Nirmala Sitharaman however the interplay was not formalised.
The authorities had 90 days — till March — to problem the December award in the next court docket in Singapore. The authorities had earlier hinted that the one potential resolution for each events to keep away from additional litigation was for Cairn Energy to comply with the federal government’s Vivad se Vishwas tax amnesty and dispute decision mechanism.
The dispute stems from the a lot debated retrospective taxation concern. In 2006-2007, Cairn UK had, as a part of an inner rearrangement, transferred shares of Cairn India Holdings to Cairn India. Income-tax authorities then determined that since Cairn UK had made capital features, it should pay capital features tax as much as Rs 24,500 crore.
The firm interpreted Indian legal guidelines on capital features otherwise and refused to pay. Several rounds of litigation on the Income-Tax Appellate Tribunal (ITAT) and the High Court adopted. Cairn misplaced the case at ITAT; a case on the valuation of capital features is pending earlier than Delhi High Court.
While Cairn Energy offered nearly all of its India enterprise, Cairn India, to mining large Vedanta in 2011, income-tax authorities barred it from promoting about 10 per cent, citing pending taxation points. The cost of dividend by Cairn India to Cairn Energy was additionally frozen.
In its judgment, the PCA at The Hague mentioned the problem was not simply associated to tax, however was an investment-related dispute – and was subsequently below the jurisdiction of the worldwide arbitration court docket.
The arbitration tribunal added India should not make any extra makes an attempt to get well “the alleged tax liability or any interest and or penalties arising from this alleged liability through any other means”.