India lost the Cairn arbitration case.The case was related to the retrospective tax amendment law and the verdict came late night Tuesday. How did the dispute arise?
Cairn received a notice from the income tax department in January 2014, raising a preliminary assessment of Rs 10,247 crore tax liability relating to the group reorganisation done in 2006, when Cairn UK transfered about 10 per cent shares of Cairn India Holdings to Cairn India.This gave rise to different interpretations on whether the UK-based company made capital gains, preceding an initial public offering (IPO) of shares by Cairn India.In March 2015, the I-T department had contended that Cairn UK made a capital gain of Rs 24,503.5 crore in the internal reorganisation. Cairn Energy in 2015 initiated an international arbitration to challenge retrospective taxation.
In the Verdict, India has been asked to pay Rs 8,000 crore in damages to the UK oil major. This amount is equivalent to the value of shares of Cairn that the government had sold to recover a part of the tax demand. It also includes the dividends and tax refund seized.
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