IMG to decide govt action on Cairn arbitration next week

An inter-ministerial group (IMG) will meet next week to decide on government action on the arbitration notice slapped by UK's Cairn Energy Plc over the Rs 10,247-crore tax dispute.
Finance Minister Arun Jaitley today discussed with his ministry officials the arbitration notices served by foreign firms ahead of the IMG meeting next week.
Revenue Secretary Shaktikanta Das said IMG will meet next week and put forth its views to Jaitley.
"On the Cairn tax case, the IMG will decide in a week or shortly on the arbitration notice sent by the Cairn Plc. Then the recommendations of the panel will be sent to Finance Minister for his views," Das said.

The IMG will include senior officials from the ministries of finance, law and petroleum.
Finance Ministry had initially rejected Cairn Energy's plea for an arbitration saying taxation is not a matter of arbitration and is not covered under the UK-India Investment Promotion and Protection Treaty.

But the company is seeking similar treatment as Vodafone. The government had decided to join the arbitration initiated against the Rs 20,000 crore tax demand made on UK telecom major Vodafone and last month appointed Costa Rica-based international lawyer Rodrigo Oreamuno to arbitrate on its behalf.
"The Finance Minister took stock of all the arbitration notices that the government has been receiving to form a broad policy for future course of action," Das told reporters here.

Using the India-UK Investment Protection treaty, Cairn has named former Bulgarian minister and lawyer Stanimir A Alexandrov as its arbitrator and asked the government appoint its own judge on a three-member arbitration panel to go into the Rs 10,247 crore tax demand raised against it using retrospective taxation.
Finance Ministry had replied to this saying it has been the consistent stand of Government of India that taxation is not covered under bilateral investment treaties.
The Income Tax Department says Cairn Energy allegedly made a capital gain of Rs 24,503.50 crore in 2006 when it transfered all its India assets to a new company, Cairn India, and got it listed on the stock exchanges.

Cairn Energy, which had in 2011 sold majority stake in its Indian unit to mining group Vedanta for USD 8.67 billion, still holds 9.8 per cent stake in Cairn India. The Income Tax Department, in January last year, barred it from selling this stake.