Cairn Energy asks India to pay $5.6 billion for raising tax demand

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PrintBritish oil explorer, Cairn Energy, has demanded India to pay as much as $5.6 billion for raising a tax demand of Rs 29,047 crores on an internal reorganisation of its India unit.

India asked the firm to pay $1.6 billion retroactively for the 2007 listing of its India operation following which Cairn took its case to the international arbitration court in The Hague.

Majority stake in Cairn India was sold to Vedanta Resources in 2011, but it (Cairn Energy) still holds 9.8% stake, and this was attached to I-T Department.

The Income Tax department had in January 2014 slapped a draft tax assessment of Rs 10,247 crore on the oil explorer on the alleged capital gain it had made when it shifted its India assets to a new subsidiary, Cairn India in 2006 and got it listed.

The total compensation sought is equal to the tax demand raised and the value of Cairn Energy’s 9.8%-shareholding in Cairn India.

The arbitration panel, headed by Geneva-based arbitrator Laurent Levy, is hearing Cairn Energy’s plea against tax demand. The company filed its Statement of Claim late last month and India will file its Statement of Defence by November. Hearing in the case is likely to begin early 2017.

The Edinburgh-based firm has sought that the tax demand be revoked and also announce that India has failed to uphold its duties under UK-India Investment Treaty.