Cairn to get retro tax refund, pull back case
NEW DELHI: Moving quickly towards ending a retrospective tax dispute with a firm that gave India its largest oilfield, the government has accepted Cairn Energy PLC’s undertakings which would allow for the refund of taxes, sources said.
Meeting the requirements of the new legislation that scraps levy of retrospective taxation, the company had earlier this month given required undertakings indemnifying the Indian government against future claims as well as agreeing to drop any legal proceedings anywhere in the world.
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, two sources with direct knowledge of the development said.
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 concrore firmed 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 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” to participate in a scheme allowing refund of taxes previously collected from Cairn in India.