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Cairn Confirms Final Hearing Date In Indian Tax Dispute

by Mary Swire,, Hong Kong

21 September 2017

Cairn Energy on September 20 provided an update on the arbitration proceedings taking place as a result of its long-running dispute with the Indian tax authority.

In a statement, the group announced that: "The arbitration proceedings are well advanced, and the Tribunal and parties have now agreed the process and timetable for finalising document production, submissions, and hearings. This includes some extensions to the previously agreed schedule, and taking into account the Tribunal and Parties' availability, the final hearing has now been scheduled for August 2018."

The dispute stems from an intra-group restructuring that Cairn undertook in 2006, to facilitate the Initial Public Offering (IPO) of its subsidiary in India, Cairn India Limited (CIL).

In 2012, India retrospectively amended Indian tax law. The amendment was given retroactive effect from 1961, the year in which India's current income tax legislation was introduced. It was introduced after a ruling from the Supreme Court in the Vodafone International Holdings BV case, in which the court said that transfers of non-resident companies made by non-residents should not attract Indian capital gains tax. Indian lawmakers defied the ruling by amending Section 9 of the Income Tax Act 1961 with retroactive effect.

Although the circumstances for Cairn's affected transactions are different, India likewise used the retrospective amendment to assess tax worth about INR102bn (USD1.57bn), plus interest dating back to 2007 totalling INR188bn, on transactions linked to Cairn's restructuring.

The case is being heard in international arbitration under the UK-India Bilateral Investment Treaty, sought by Cairn in 2015.

TAGS: court | capital gains tax (CGT) | tax | India | energy | legislation | tax planning | legislation amendments

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