Final hearing in Cairn arbitration against retro tax to begin today
The final hearing in British oil firm Cairn Energy plc's challenge to India imposing a ~102.47 billion retrospective tax demand will begin in The Hague on Monday, people familiar with the matter said.
A three-member international arbitration tribunal will begin the 7-10-day-long hearing under the cloud of tax department reportedly looking to sell Cairn's remaining shares in Vedanta to recover the tax demand.
The income tax department had beginning May 14 — the day the temporary charge of finance portfolio was given to Piyush Goyal sold about 64.5 million shares or around 40 per cent of Cairn's shareholding in Vedanta. As many as 20 million shares were sold between May 14 and May 17. Sources said India in April submitted its final rejoinder to Cairn's claim for full restitution for losses resulting from the expropriation of its investments in India in 2014 and continued attempts to enforce retrospective tax measures.
This was followed by Cairn submitting its final pleading in May and now the tribunal would begin final oral hearing before sitting down to write the judgment, they said, adding the arbitration award may come as early as three-four months.
The tax department had in January 2014 used a two-yearold retrospective tax law to raise a ~102.47-billion demand on alleged capital gains made by Cairn Energy on a decadeold internal reorganisation of its India business.
This was followed by attaching the company's residual 9.8 per cent shares in its erstwhile subsidiary, Cairn India. Cairn India was subsequently merged with its new parent Vedanta, in which Cairn Energy held about 4.95 per cent stake. These shares continued to be attached for four years but the tax department had earlier this year got them transferred to it.
Vedanta in its March quarter filing of shareholding pattern to stock exchanges showed 184.1 million (4.95 per cent) shares being held by Tax Recovery Officer (International taxation)-I. This in the June quarter filing dropped to 119.6 million shares (3.22 per cent).
Cairn had on July 9 stated that the tax department sold about 40 per cent of its shares in Vedanta for $216 million and may sell remaining stake as well.