The Centre has accepted the required undertakings given by Cairn Energy PLC, a move that would allow refund of taxes thus ending a retrospective tax dispute with a firm that gave India its largest oilfield. The undertakings required the UK-based energy company to indemnify the Indian government against future claims and withdraw any pending legal proceedings.
The government has now accepted this and issued Cairn a so-called Form-II, committing to refund the tax collected to enforce the retrospective tax demand, PTI reported quoting sources. Following the issuance of Form-II, Cairn will now start withdrawing all cases in international courts.
Once this is complete, the company will be issued a ₹7,900 crore refund, they said, adding the withdrawal of cases may take up to three-four weeks.
While a Cairn spokesperson did not immediately respond to requests for comments, a senior finance ministry official confirmed the government accepting the company’s undertakings.
Seeking to repair India’s damaged reputation as an investment destination, the government in August enacted new legislation to drop ₹1.1 lakh crore in outstanding claims against multinationals such as telecom group Vodafone, pharmaceuticals company Sanofi and brewer SABMiller, now owned by AB InBev, and Cairn.
About ₹8,100 crore collected from companies under the scrapped tax provision are to be refunded if the firms agreed to drop outstanding litigation, including claims for interest and penalties. Of this, ₹7,900 crore is due only to Cairn.
Subsequent to this, the government last month notified rules that when adhered to will lead to the Centre withdrawing tax demands raised using the 2012 retrospective tax law and any tax collected in the enforcement of such demand being paid back.
For this, companies were required to indemnify the Indian government against future claims and withdraw any pending legal proceedings.
Cairn on November 3 had stated that it has “entered into undertakings with the Government of India in order to participate in the scheme introduced by recent Indian legislation, the Taxation Laws (Amendment) Bill 2021, allowing the refund of taxes previously collected from Cairn in India.”
Cairn’s undertaking furnished in Form No.1 under the rule 11UE(1) of the amended law have been accepted by the Principal Commissioner for Income Tax, the sources said.
The August legislation cancelled a 2012 policy that gave the tax department power to go back 50 years and slap capital gains levies wherever ownership had changed hands overseas but business assets were in India.
(With PTI inputs)