Cairn Energy settles tax dispute with India


Cairn Energy Plc. on Wednesday said it has entered into a deal with the Indian government to settle its long pending tax dispute as per which the Indian tax authority will refund ₹7,900 crore or approximately $1.06 billion to the British explorer. 

The settlement is done under the Taxation Laws (Amendment) Act introduced this year to put an end to 17 tax disputes India has with multinational companies like Cairn and Vodafone Plc. which entailed controversial use of an anti-abuse provision in the law with retrospective effect. 

Cairn said that to satisfy the conditions of settlement, it will commence the filing of necessary documentation under India’s Income Tax rules intimating the withdrawal of various enforcement actions. Last December, an arbitral tribunal had granted an award in favour of Cairn asking India to pay $1232.8 million plus interest and $22.38 million towards arbitration and legal costs. 

“Cairn is working collaboratively with the government of India towards expediting the refund within the process of the Tax Amendment Act Rules. The previously announced special dividend is expected to be paid by early 2022,” the company said in its statement. 

In September, Cairn had said up to $700m would be returned to shareholders via special dividend and buyback, with the remainder retained to further enhance the producing asset base. 

Cairn’s announcement brings one of the most controversial tax disputes in India to an end. Although the political leadership of the National Democratic Alliance (NDA) had denounced the retrospective effect with which the anti-abuse provision was introduced in tax law during the United Progressive Alliance (UPA) regime, a settlement scheme fructified only now. The logical conclusion of the case in international arbitration makes it politically feasible for the government to offer settlement.  

As per the settlement, Cairn and related parties have agreed that claims relating to arbitration award or court order no longer subsist. The company has also given a complete release of the Republic of India and any Indian affiliates with respect to the awards, judgement and court orders as well as an indemnity in respect of any claims brought against the Republic of India by related parties or interested parties. 

If the Indian authorities reject the undertaking given by the company or declines to grant relief under the settlement rules, these undertakings will be treated as having never been given, the company statement said. 


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