The dispute between the government and Cairn Energy relates to retrospective taxation similar to Vodafone arbitration case
What is Cairn Energy Arbitration case?
By: Manashaa G
Cairn India acquired the entire share capital of Cairn India Holdings from Cairn UK Holdings in exchange for 69% of its shares back in 2006
Where it all started?
However, IT department saw it differently
Cairn Energy stated that this was purely business reorganization with no tax motive
Cairn with a tax demand of Rs 24,000 Crore
What did the Indian Govt do?
Cairn refused to pay the tax. This prompted the cases being filed at Income Tax Appellate Tribunal (ITAT) and the Delhi HC
Cairn lost the case at ITAT; however, a case on the valuation of capital gains is still pending before the Delhi HC
Tax authorities seized what little Cairn owned in India and sold them off. Cairn also believed they were entitled to a tax refund
The issue again rose when the tax authorities denied Cairn Energy the refund amount
After which, Cairn Energy took the case to permanent court of arbitration at Hague
PCA at The Hague said Cairn Tax issue was not just a tax related issue, but an investment related dispute
PCA asked Indian Govt to pay $1.2 billion plus interest and costs for damaged caused to Cairn