This is the second setback for Indian authorities associated to retrospective taxation after it misplaced the arbitration case in opposition to Vodafone three months in the past
Dilasha Seth |
Last Updated at December 23, 2020 12:25 IST
In a serious setback, Indian authorities has misplaced arbitration to power big Cairn underneath the retrospective tax modification to the legislation in a verdict that got here late night time on Tuesday. India has been requested to pay damages value Rs 8,000 crore to the UK oil main. The verdict comes three months after India misplaced arbitration to Vodafone over the retrospective laws.
The International Court of Justice at The Hague has maintained that the Cairn tax concern just isn’t a tax dispute, however a tax associated funding dispute. Hence, it falls underneath its jurisdiction. It has dominated that India’s demand in previous taxes was in breach of honest remedy underneath a bilateral funding safety pact. The case pertains to a Rs 24,500 crore tax demand on capital positive aspects made by the oil main in reorganisation of its India enterprise in 2006-07.
The Indian authorities has been requested to pay Cairn Rs 8,000 crore in damages, which embody the shares connected by the Income Tax Department in January 2014 and bought in 2018 to partially get better the tax dues. Cairn Energy held 4.95 per cent stake in mining main Vedanta Ltd which the Income Tax Department connected after issuing a tax demand to the British agency in 2014. The authorities has been requested to pay damages on the share worth of Rs 330 in 2014 as an alternative of the Rs 220-240 per share value on which it was truly bought by the Income-Tax Department in 2018, in tranches. The damages additionally embody Rs 1,590 crore of tax refund as a result of British firm in addition to the authorized charges.
The verdict has additionally famous arguments by the Edinburgh-based firm that the tax demand got here up after Vodafone tax case, which was quashed by the Indian courts.
The order has taken notice of arguments and statements by Bharatiya Janata Party leaders, whereas in Opposition that point over the retrospective tax amendments and the worldwide disputes, with senior leaders like Arun Jaitley calling it ‘tax terrorism’.
Cairn had misplaced case at Income tax appellate tribunal (ITAT) and the matter is earlier than High Court over the valuation of capital positive aspects and never the constitutionality of the tax demand.
The tax demand by India was in respect of Cairn UK transferring shares of Cairn India Holdings to Cairn India, as a part of an inner group reorganisation in 2006-07. This gave rise to totally different interpretations on whether or not the UK-based firm made capital positive aspects, previous an preliminary public providing (IPO) of shares by Cairn India. The I-T division had contended that Cairn UK made a capital acquire of Rs 24,503.5 crore. Before the Cairn India IPO, the India operations of Cairn Energy had been owned by an organization known as Cairn India Holdings-Cayman Island and its subsidiaries. Cairn India Holdings was a totally owned subsidiary of Cairn UK Holdings, in flip a totally owned subsidiary of Cairn Energy.
At the time of the IPO, possession of the India property was transferred from Cairn UK Holdings to a brand new firm, Cairn India. In 2006, Cairn India acquired your complete share capital of Cairn India Holdings from Cairn UK Holdings. In change,