• Home
  • Article
  • Government Refunds Cairn Rs. 7,900 Crore, to Settle Retro Tax Issue

Sushmita Goswami | Feb 25, 2022 | Views 301663

Government Refunds Cairn Rs. 7,900 Crore, to Settle Retro Tax Issue

Government Refunds Cairn Rs. 7,900 Crore, to Settle Retro Tax Issue

The Indian government has paid Cairn Energy Plc a total of Rs 7,900 crore to repay taxes it had collected to enforce a retrospective tax claim, putting an end to a seven-year battle that had tarnished the country’s image as an investment destination.

In a statement, the business, now known as Capricorn Energy PLC, said it had received “net proceeds of $ 1.06 billion,” roughly 70% of which will be given to shareholders.

The tax department had sought $10,247 crore in taxes from Cairn under a 2012 law that allowed it the authority to go back 50 years and apply capital gains levies wherever ownership had changed hands overseas but commercial assets were in India.

Prior to listing on stock exchanges, Cairn reorganized its India business, which included operations of lucrative Rajasthan oil fields, in 2006-07. While the business sold a controlling stake in its India unit to Vedanta in 2011, it was hit with a tax demand notice in 2014 for claimed capital gains on the reorganization.

The British company disputed the demand, claiming that all taxes owed were paid in full when the reorganization was completed, which was allowed by all statutory authorities.

The tax authorities, on the other hand, seized and auctioned Cairn’s remaining shares in the Indian company in 2014. It also delayed tax refunds and confiscated dividends owed to it in order to pay off a portion of the tax debt. All of this came to a total of Rs. 7,900 crore.

Cairn took the government to international arbitration over the levy and enforcement actions, and received a favorable judgement on December 22, 2020, ordering India to return the tax collected, plus interest and penalty.

The government first refused to honor the award, but in August 2021, it passed legislation repealing all retrospective tax requests and reimbursing money collected with no interest or penalty.

Following Cairn’s seizure of the Indian government’s abroad assets — ranging from flats used by its diplomatic personnel in Paris to Air India jets in the United States — the government of India changed its mind.

Cairn dismissed all cases sought to collect the tax return ordered by the international arbitration tribunal after rescinding retrospective raising of demand as part of the compromise agreed with the government over the charging of back taxes.

“India has a significant position in our company’s history,” said Simon Thomson, CEO of Capricorn Energy. “We are very glad that this matter has now been resolved.” He explained that the company’s investment in India began in the 1990s, when it became one of the first multinational companies to participate in the country’s oil and gas industry, with operations in Andhra Pradesh and then Gujarat.

The finding of the Mangala oil field in Rajasthan in January 2004, one of the country’s largest ever hydrocarbon discoveries, had the most impact.

“With production starting in August 2009, the business made more than 40 finds in the area and built the world’s longest heated pipeline to transport crude from the Mangala Processing Terminal to the coast.” The port continues to supply more than a third of India’s crude oil production today,” he said.

The finding of the Mangala oil field in Rajasthan in January 2004, one of the country’s largest ever hydrocarbon discoveries, had the most impact.

“With production starting in August 2009, the business made more than 40 finds in the area and built the world’s longest heated pipeline to transport crude from the Mangala Processing Terminal to the coast.” The port continues to supply more than a third of India’s crude oil production today,” he said.

Following that, in November 2021, the government issued guidelines that, if followed, will result in the government removing tax demands made under the 2012 retrospective tax law, and any tax collected in the enforcement of such requests will be refunded.

Companies must indemnify the Indian government against future claims and withdraw any ongoing legal processes in exchange for this.

Cairn had filed litigation in multiple jurisdictions to enforce the international arbitration ruling, which had reversed the levy of 10,247 crore retrospective taxes and ordered India to restore the money already collected, on November 26, 2021.

First, a lawsuit in Mauritius seeking recognition of the arbitration award was dropped, followed by similar actions in Singapore, the United Kingdom, and Canada.

It sought and received ‘voluntary dismissal’ of a lawsuit it had filed in a New York court to take assets of Air India in order to recover money owed to the government on December 15, 2021. On the same day, it filed a similar motion in a Washington court, asking for the arbitration award to be recognized.

Recognition of an arbitration award is required before any enforcement actions, such as asset seizure, can be conducted.

Following that, a crucial case in a French court, which had attached Indian properties on Cairn’s petition, was withdrawn, as was another in the Netherlands.

Following that, the firm produced documentary verification of the cases’ withdrawal as well as an indemnity bond. It was repaid Rs. 7,900 crore after a thorough examination of the document.

Source: The Hindu

StudyCafe Membership

Join StudyCafe Membership. For More details about Membership Click Join Membership Button

Join Membership

In case of Any Doubt regarding Membership you can mail us at contact@studycafe.in

Join Studycafe's WhatsApp Group or Telegram Channel for Latest Updates on Government Job, Sarkari Naukri, Private Jobs, Income Tax, GST, Companies Act, Judgements and CA, CS, ICWA, and MUCH MORE!"




Author Bio

My Recent Articles

NMDFC Recruitment 2022 for Apprenticeship: Check Post Details IPPB Recruitment 2022: Apply till Nov 30, Check Posts and How to Apply CRPF Recruitment 2022 for 322 Vacancies: Check Posts, Eligibility and How to Apply Hindustan Copper Recruitment 2022 for 290 Vacancies: Check Posts, Qualification and How to Apply NHAI Recruitment 2022: Check Post, Qualification and Other Details View All Posts

Leave a Reply