Cairn hopeful of solution in tax tussle with the govt
Cairn Energy Plc on Sunday said it is working for a “swift resolution" in a tax dispute with India in which the Edinburgh-headquartered firm won a $1.2 billion international arbitration award on 23 December.
The move articulating Cairn Energy Plc’s position comes after the Centre’s decision to appeal against the arbitration award and to contest all cases filed by Cairn in international courts. India can challenge the arbitration award before the end of March.
The dispute relates to a retrospective amendment of tax rules in 2012, which gave the government the authority to tax merger and acquisition (M&A) transactions dating back to 1962 if the underlying asset was in India. The Centre had earlier raised a tax demand of around ?10,400 crore, besides an equal amount in penalty and interest accrued.
According to Cairn, India seized residual shares in Cairn India, which was acquired by Vedanta Resources, as well as a tax refund due to the British firm, amounting to around ?10,570 crore.
Cairn Energy Plc’s chief executive Simon Thomson met finance secretary Ajay Bhushan Pandey on Thursday and Friday, with the Centre resolving to defend sovereign rights in taxation.
“We have had cordial and constructive discussions in Delhi over the last few days with ministry of finance officials. Notwithstanding and without prejudice to our rights under the international arbitration award, we have discussed proposals with the aim of finding a swift resolution that could be mutually acceptable to government of India and interests of Cairn’s shareholders," a Cairn Energy Plc spokesperson said in a statement on Sunday.
“Assuming such a resolution can be achieved, we look forward to being able to move on to further opportunities to invest in India which continues to import the majority of the energy sources it consumes," according to the Cairn statement on Sunday.
This comes against the backdrop of the Centre’s willingness to settle the tax dispute if Cairn chooses to do so under the direct tax dispute settlement scheme, Vivad se Vishwas, which gives relief on interest and penalty if the principal tax demand is paid. An email seeking finance ministry’s comment on Sunday afternoon remained unanswered till the time of publishing.
“The business we created in India has generated over $20 billion in revenue for the government," the Cairn Energy spokesperson said in the statement. “The freezing of our assets in 2014 to enforce a retrospective tax measure has been negative for all parties and we are keen to be able to put this matter behind us and move forward positively," the spokesperson added.
The government of India in 2015 terminated 73 bilateral investment protection agreements treaties to negotiate fresh ones that exclude taxation from their purview.
“We remain hopeful that an acceptable solution can be found to avoid prolonging and exacerbating this negative issue for all parties. However, we have been clear that we must continue to take all necessary steps to protect the interests of our shareholders," the Cairn Energy spokesperson noted.