Cairn UK Holdings (CUHL) along with its holding company Capricorn Energy PLC has announced withdrawing litigations against Indian government. This is final stage for ending retrospective tax dispute.
Once the formalities completed, the Government will issue refund of around ₹8,000 crore.
“CUHL along with its holding company, Capricorn Energy PLC (formerly Cairn Energy PLC) announces that, it has entered into the final stage in its undertakings with the Government of India by withdrawing Indian and global appellate and enforcement proceedings,” an advertisement by Capricorn said. Further, it mentioned that the action is the final necessary step by the company under the rules of the Taxation Laws (Amendment) Act, to end retrospective taxation.
Last year, the government enacted the Taxation Laws (Amendment) Act to amend Income Tax Act 1961 and Finance Act 2012. It prescribes that tax demands raised on the basis of the 2012 retrospective amendment for any indirect transfer of Indian assets, if the transaction was undertaken before May 28, 2012, shall be “deemed never to have been passed or made”. It was on May 28, 2012 the Finance Bill, 2012 got the President’s assent. It also envisages that no tax demand will be raised in future for transactions made before May 28, 2012.
The Act also says demand already raised will be ‘nullified’ but with conditions such as the companies concerned will have to withdraw all mentioned legal suits. Once they submit the declaration, the government will refund the amount paid in these cases without any interest thereon. The government has already notified detailed rules and framework to operationalise the law.
Capricorn said that the company will now file its Form 3 with the Income Tax Department, which will allow the government to proceed to the final stage of issuing Form 4 of its undertakings. “This will result in the Taxation Amendment Act nullifying the tax assessment originally levied against the company in January 2016 and the Government of India ordering the refund of the taxes collected from the company in respect of that assessment,” it said.
Hague based Arbitral tribunal pronounced its award on December 21, 2020 in favour ofCairnEnergy Plc andCairnUK Holdings Ltd (CUHL). It has asked India to pay Cairn an award amount of $ 1232.8 million plus interest and $ 22.38 million towards arbitration and legal costs. In March last year, India has filed appeal against the ruling.
However, in May last year, the company filed a lawsuit in US Court against Air India to enforce award. Then in July, a French court passed an order to freeze certain Indian Government properties in the case pertaining to Cairn Energy. In the beginning of 2021,Cairnmoved courts in the US, the UK, the Netherlands, Canada, France, Singapore, Japan, the UAE and Cayman Islands to get the award registered and recognised. This was the first step before it can seek seizure of the Indian government assets.
Now, the company has confirmed that any claims arising out of or relating to the relevant orders or any related award, judgement of court order (together the awards, judgements and court orders), no longer subsist. It has also indemnified against any claims brought against India or any Indian affiliate, including by related parties or interested parties, contrary to the release.