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