Cairn Energy Withdraws All Litigations Against India, To Receive ₹7900 cr Refund Of Retrospective Tax Collected During UPA Era

Cairn UK Holdings (CUHL), a leading oil and gas company, has announced that it has dropped all lawsuits against the Indian government and its entities in courts from the US to France and to Singapore.

The group will now be entitled for about Rs 7,900 crore refund of taxes that were collected to enforce a retrospective tax demand placed by UPA government under Prime Minister Manmohan Singh in 2012.

As part of the settlement reached with the government in the seven-year-old dispute over the levy of back taxes, the company - which is now known as Capricorn Energy PLC - has withdrawn all cases that were brought to collect the tax refund ordered by an international arbitration tribunal after rescinding retrospective raising of demand.

Retrospective Tax Amendment By UPA government

In 2012, UPA government brought in an amendment to the Income Tax Act, 1961 and imposed retrospective tax on various prior transactions.

The tax department used the 2012 legislation to impose Rs 10,247 crore in taxes on alleged capital gains Cairn made on reorganisation of business in India prior to its listing in 2006-07. Cairn contested such demand saying all taxes due(when the reorganisation, which was approved by all statutory authorities took place) were duly paid.

Seeking to repair India's damaged reputation as an investment destination caused by the retrospective taxation , the Modi government in August 2021 enacted new legislation to drop Rs 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 Rs 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, Rs 7,900 crore is due only to Cairn.

Subsequent to this, the government in November 2021 notified rules that when adhered to will lead to the government withdrawing tax demands raised using the 2012 retrospective tax law and any tax collected in the enforcement of such demand is paid back. For this, companies are required to indemnify the Indian government against future claims and withdraw any pending legal proceedings.

(With inputs from PTI)