CAIRN WRITES TO MODI ON TAX DIS­PUTE AHEAD OF THERESA MAY’S VISIT

CAIRN EN­ERGY HAS ALSO WRIT­TEN A SIM­I­LAR LET­TER TO FI­NANCE MIN­IS­TER ARUN JAITLEY

Resource Digest - - RESOURCE DIGEST -

Ahead of Bri­tish Prime Min­is­ter Theresa May's maiden visit, UK'S Cairn En­ergy has writ­ten to Prime Min­is­ter Naren­dra Modi re­mind­ing him that res­o­lu­tion to the Rs 29,047 crore ret­ro­spec­tive tax de­mand it faces is still pend­ing.

The Ed­in­burgh-based firm told Modi that it has been more than 1,000 days that a tax no­tice was slapped on it us­ing a ret­ro­spec­tive leg­is­la­tion but a res­o­lu­tion is nowhere in sight.

Cairn En­ergy has also writ­ten a sim­i­lar let­ter to Fi­nance Min­is­ter Arun Jaitley.

When con­tacted, Com­pany CEO Si­mon Thom­spon re­fused to com­ment on its dis­cus­sions with gov­ern­ment.

Pressed fur­ther, he said pend­ing res­o­lu­tion of the ret­ro­spec­tive tax cases re­mains a con­cern for in­ter­na­tional in­vestors and fu­ture in­vest­ments par­tic­u­larly in the ex­plo­ration and pro­duc­tion sec­tor de­pend on an am­i­ca­ble res­o­lu­tion.

The NDA gov­ern­ment had made pos­i­tive vibes when it had stated that it would not pur­sue tax ter­ror­ism in­clud­ing cre­at­ing new tax de­mand us­ing ret­ro­spec­tive tax case, he said. "But our case re­mains un­re­solved."

In fact, only a draft as­sess­ment or­der was is­sued in Jan­uary 2014 dur­ing the UPA rule and a fi­nal tax de­mand was raised by the present gov­ern­ment.

"Why hasn't leg­isla­tive been used to scrap the ret­ro­spec­tive tax de­mands," he asked. "Such a move will pro­vide im­pe­tus to in­vest­ments in In­dia."

It is in the in­ter­est of In­dia that ret­ro­spec­tive tax de­mand is re­solved once and for all, he said.

Cairn En­ergy has ini­ti­ated ar­bi­tra­tion un­der the In­dia-uk bi­lat­eral in­vest­ment pro­tec­tion treaty but In­dia is seek­ing to put on hold the pro­ceed­ings and in­stead wants a par­al­lel ar­bi­tra­tion ini­ti­ated by Vedanta Re­sources to be taken up first.

The gov­ern­ment, us­ing ret­ro­spec­tive tax leg­is­la­tion, had in Jan­uary 2014 is­sued a tax no­tice on Cairn En­ergy for al­leged cap­i­tal gains it made on a 10-year old in­ter­nal re­or­gan­i­sa­tion of its In­dia unit.

Three months later in April 2014, it im­posed a tax de­mand of Rs 20,495 crore on Cairn In­dia, the UK firm's erst­while sub­sidiary for fail­ing to deduct tax on the cap­i­tal gains. Cairn En­ergy and Vedanta, which had bought Cairn In­dia from the Scot­tish firm in 2011, had ini­ti­ated sep­a­rate ar­bi­tra­tions against the tax de­mands.

Cairn En­ergy had ini­ti­ated the ar­bi­tra­tion in March 2015 and the three-mem­ber ar­bi­tra­tion panel had been con­sti­tuted. But at a hear­ing last month, the gov­ern­ment con­tended that the pro­ceed­ings should be put on hold, sources said.

Its coun­sel ar­gued that the gov­ern­ment wants the ar­bi­tra­tion ini­ti­ated by Vedanta to be taken up first.

Sources said the coun­sel also made an ap­pli­ca­tion seek­ing more time to file re­ply to Cairn En­ergy's de­mand for $5.6 bil­lion in com­pen­sa­tion from the In­dian gov­ern­ment for rais­ing a ret­ro­spec­tive tax de­mand.

As per the sched­ule drawn up, the re­ply was to be filed by mid-novem­ber.

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