Cairn Energy wins retro tax case; India ordered to pay $1.2 bn

UK's Cairn Energy Plc has won an arbitration against the Indian government levying Rs 10,247 crore in retrospective taxes, the company said on Wednesday.

The three-member tribunal, which also comprised a judge appointed by the Indian government, ruled that India's claim of Rs 10,247 crore in past taxes over a 2006-07 internal reorganisation of Cairn's India business was not a valid demand, sources said.

The tribunal asked India to pay the funds withheld along with the interest to the Scottish oil explorer for seizing dividend, tax refund, and sale of shares to partly recover the dues.

Confirming the award, Cairn in a statement said "the tribunal established to rule on its claim against the Government of India has found in Cairn's favour."

Cairn had challenged the Indian government seeking taxes over an internal business reorganisation using the 2012 retrospective tax law, under the UK-India Bilateral Investment Treaty.

"The tribunal ruled unanimously that India had breached its obligations to Cairn under the UK-India Bilateral Investment Treaty and has awarded to Cairn damages of $1.2 billion-plus interest and costs, which now becomes payable," it said.

This is the second blow to the government over the retrospective tax issue in three months.

A separate international arbitration tribunal had in September ruled against India levying retrospective taxes on Vodafone Group.

Photograph: Reuters