Billionaire Anil Agarwal's mining group Vedanta on Monday said it has withdrawn cases in the Delhi High Court as well as before an international arbitration tribunal to settle a Rs 20,495 crore retrospective tax dispute with the government.
Post slapping of a Rs 10,247 crore tax demand on UK's Cairn Energy Plc for alleged capital gains made on a 2016 internal reorganisation prior to the listing of its India business, the Income Tax Department had sought Rs 20,495 crore in taxes (including penalty) from Cairn India for failing to deduct tax on capital gains made by its British parent.
Cairn India was in 2011 bought by Agarwal's group and subsequently, the firm was merged with Vedanta Ltd.
As conditions for the same, it has withdrawn all legal challenges against the government and given an undertaking to forego all future rights pertaining to the tax demand.
Cairn Energy, which has maintained that no tax as per the prevalent regime was due on the 2006 reorganisation and won an international arbitration against the 2015 order seeking back taxes, is parallelly settling its dispute with the government. It is withdrawing cases to get a Rs 7,900 crore of refund of taxes collected from it using the retrospective tax law.
Vedanta had challenged the demand for taxes at two forums -- the Income Tax Appellate Tribunal and Delhi High Court while its parent Vedanta Resources challenged the move before a Singapore arbitration tribunal.
While the Delhi High Court was continuing to hear the matter, the arbitration tribunal had completed the hearing and was due to pass an order anytime now.
"In view of the recent amendments to the Indian Income Tax Act, 1961 vide the Taxation Laws (Amendment) Act, 2021, which nullifies the retrospective tax imposed by Finance Act, 2012, Vedanta Ltd, and all its related group entities have taken steps to settle disputes arising from Order dated March 11, 2015, passed by the Deputy Commissioner of Income-tax, International Taxation, Circle - Gurgaon," the firm said in a statement.
As required by the new law, Vedanta Ltd, along with its related group entities, filed the required statutory forms and undertakings in the prescribed Form 1, seeking to settle the disputes.
The forms and undertakings have been accepted by the jurisdictional Commissioner, and accordingly, a certificate to this effect, as prescribed in Form No 2 has been issued.
"Pursuant to the declarations in the aforesaid forms and undertakings, Vedanta Ltd has withdrawn the income tax appeal pending before the Delhi bench of the Income Tax Appellate Tribunal and also withdrawn writ petition filed before the Delhi High Court," the statement said.
The firm's parent Vedanta Resources Ltd has also filed the application seeking withdrawal of the claim and termination of the arbitral proceedings pending before the Permanent Court for Arbitration in the International Court of Justice it said.
"Vedanta Ltd and its related group entities also declare that no further proceedings or claims shall be initiated in any court or tribunal whether in India or outside India, pursuant to fulfillment of conditions (withdrawal of the tax demand)," the firm said.
It went on to state that the firm and its related group entities and parties have given the undertaking to "forever irrevocably forgo" any claims that could have been made because of the legal challenges.
It has also given an undertaking for "a complete release of the Republic of India and any Indian Affiliates with respect to any award, judgment, or court order."
The undertaking also includes an indemnity against any claims brought against the Republic of India or any India affiliate, and to treat any such award, judgment, or court order as null and void and without legal effect, the statement said.
Cairn India Ltd received a demand totaling Rs 20,495 crore (including interest of Rs 10,247 crore) holding the company as an assessee in default. The company has challenged the said order before the Income Tax Appellate Tribunal (ITAT).
It also filed a writ petition before the Delhi High Court wherein it has raised several grounds against the order. The matter came up for hearing on July 29, 2021.
Separately, Vedanta Resources Limited has filed a Notice of Claim against the Government of India under the Bilateral Investment Treaty. The hearing concluded in May 2019.
Separately, Cairn UK Holdings Limited, a unit of Cairn Energy, on whom the primary liability of income tax was made, in December last year won an international arbitration award against the levy.
The tribunal asked India to return the money it had collected by way of selling shares of Cairn Energy, withholding tax refunds and confiscating dividends.
The government initially refused to honour the award and challenged it. Subsequently, Cairn moved courts from New York to Singapore to confiscate Indian government assets to recover the money. It also won an order from a French court to take over Indian properties in Paris.
Thereafter, the government decided to bring the new law to scrap the retrospective tax demand and settle disputes with all companies that had faced such demand.
(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)