Retro tax: Cairn petition to indemnify govt accepted

Earlier this month, the company gave the required undertakings indemnifying the Centre against future claims. The government has now accepted this and issued Cairn the procedural form which commits to refund the tax collected, an official said.

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Cairn is now expected to start withdrawing all cases in international courts. After this, the company will be issued refunds and the withdrawal of cases may take up to three-four weeks. (File)

In a step further for resolution of retrospective tax disputes, the government has accepted Cairn Energy Plc’s undertakings to indemnify the former against future claims and withdraw any pending litigation or proceeding before any forum so as to settle their retrospective tax cases, officials said.

Earlier this month, the company gave the required undertakings indemnifying the Centre against future claims. The government has now accepted this and issued Cairn the procedural form which commits to refund the tax collected, an official said.

Following the retrospective amendment to the Income-tax Act moved by the then UPA government in 2012, tax demands were raised in 17 cases, out of which tax amount of Rs 8,100 crore has been collected for four cases. Out of this Rs 8,100 crore amount, Rs 7,800 crore is Cairn’s amount. Vodafone is yet to submit its undertaking, the official said.

The amendment was in response to a Supreme Court verdict which had held that Vodafone cannot be taxed for a 2007 transaction that involved its purchase of a 67 per cent stake in Hutchison Whampoa for $11 billion. Later, in 2014, the UPA government again used the same section to raise tax demand against Cairn Energy Plc for restructuring done in 2006.

This August, the NDA-led government brought in the Taxation Laws (Amendment) Act, 2021, stating that no tax demand shall be raised for any indirect transfer of Indian assets if the transaction took place before May 28, 2012.

Cairn is now expected to start withdrawing all cases in international courts. After this, the company will be issued refunds and the withdrawal of cases may take up to three-four weeks.

The government last month notified rules that when adhered to will lead to it withdrawing tax demands raised using the 2012 retrospective tax law and any tax collected in the enforcement of such demand being paid back. For this, companies were required to indemnify the Centre against future claims and withdraw any pending legal proceedings.

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On November 3, Cairn said it has entered into undertakings with the Centre in order to participate in the scheme introduced by the Taxation Laws (Amendment) Bill 2021, allowing the refund of taxes previously collected from Cairn in India.