India filing appeal against Cairn arbitration award, say sources

‘Cairn set up tax abusive structure, did not pay taxes anywhere on gains in India’

India is in the process of filing an appeal against an arbitration panel ruling asking it to return $1.2 billion to British oil firm Cairn Energy Plc, sources said on Wednesday.

If enforcement proceedings are initiated, India is confident of addressing them and will strongly defend its interests, the sources said, adding it is open to a constructive settlement of tax disputes within the existing legal framework.

India is in the process of filing an appeal in the Cairn arbitration award case, they said, adding it was well within India’s sovereign powers to redress the situation of Double Non-Taxation and tax abuse.

Cairn CEO Simon Thomson had last month met the then Finance Secretary Ajay Bhushan Pandey to discuss the arbitration award.

The sources said Cairn is yet to respond based on the discussions.

Cairn set up a tax abusive structure and did not pay taxes anywhere in the world on the gains that it made in India, they added.

An international tribunal had in December ruled that India violated its obligations under the U.K.-India Bilateral Investment Treaty in 2014, when the income tax department slapped a ₹10,247-crore tax assessment using legislation that gave it powers to levy taxes retrospectively.

Soon after seeking taxes over alleged capital gains made by the company over a 2006-07 reorganisation of the India business before its listing, the tax department seized Cairn’s residual 10% stake in Cairn India.

Cairn had on Tuesday said it had identified Indian assets overseas, which it could seize in the event of New Delhi failing to pay up.

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