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Cairn Energy Seeks Damages From Indian Tax Agency

by Mary Swire, Tax-News.com, Hong Kong

20 August 2015


UK-based oil and gas exploration and extraction company Cairn Energy intends to seek "restitution" from the Indian Government for losses incurred as a result of its long-running tax dispute with the country's tax authorities.

In its 2015 half-yearly results, Cairn stated that it "strongly contests the basis of the draft assessment order" issued by the tax department earlier this year, and it confirmed that it has commenced international arbitration proceedings with the Government of India under the UK-India Investment Treaty.

The company believes that it has a good argument to overturn the tax claim, explaining that the arbitration proceedings "are supported by detailed legal advice on the strength of the legal protections available to it under international law."

On March 10, 2015, Cairn received a draft assessment order from the Indian Income Tax Department in relation to the Cairn Group restructuring that was undertaken in 2006 prior to the Cairn India Limited (CIL) initial public offering, amounting to INR102.4bn (USD1.6bn), plus any applicable interest and penalties.

Shortly after receiving the order, Cairn filed a Notice of Dispute under the UK-India Investment Treaty "in order to protect its legal and economic interests." The company also revealed in its half-yearly results that it intends to seek "restitution of losses resulting from the attachment of its CIL stake since 2014."

Cairn said it has appointed an arbitrator to represent the company in this legal process and awaits news of the Government of India's appointment to the international panel.

TAGS: Energy | tax | India | interest | law | oil and gas | penalties | Investment | Invest | Investment | Tax

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