Cairn Energy has said it has complied with all provisions of retro tax repeal law
New Delhi:
Britain’s Cairn Energy on Tuesday said it has complied with all rules of the retro tax repeal law to now become eligible for about Rs 7,900 crore refund of taxes that were collected from it to enforce a retrospective tax demand.
As part of the settlement reached with the government in the seven-year-old dispute over the levy of back taxes, the company – which is now known as Capricorn Energy PLC – has withdrawn all cases that were brought to collect the tax refund ordered by an international arbitration tribunal after rescinding retrospective raising of demand, according to an advertisement it issued in Indian newspapers on Wednesday.
The government had initially refused to honour the December 2020 arbitration award but in August 2021 brought a law to scrap all retrospective tax demands and refund money collected, after it faced prospects of assets – ranging from flats used by its diplomatic staff in Paris and Air India planes in the US – being seized to recover the refund due.
“The company has concluded all necessary steps under the rules of the India Taxation (Amendment) Act 2021 required for payment by the Government of India of a tax refund of approximately Rs 7,900 crore,” the firm said in an operational and trading update. “Payment is expected to be made in early 2022.” The company on November 26, 2021, initiated proceedings to withdraw lawsuits it had filed in several jurisdictions to enforce an international arbitration award, which had overturned the levy of Rs 10,247 crore retrospective taxes and ordered India to refund the money already collected.
First, the lawsuit brought in Mauritius for recognition of the arbitration award was withdrawn, followed by similar measures in the courts in Singapore, the UK, and Canada.
On December 15, it sought and got ‘voluntary dismissal’ of a lawsuit it had brought in a New York court to seize assets of Air India to recover the money due from the government. On the same day, it made a similar move in a Washington court where it was seeking recognition of the arbitration award.
Recognition of arbitration award is the first step before any enforcement proceedings like the seizure of assets can be brought.
The critical lawsuit in a French court, which had attached Indian properties on the petition of Cairn, was withdrawn thereafter and the one in the Netherlands too was dropped.
The company thereafter filed a Form 3 with the Income Tax Department, which will allow the government to proceed to the final stage of issuing Form 4 of its undertakings.
Form 3 is an application that details the cases withdrawn. Issue of Form 4 would lead to the refund of the taxes.
“With the tax refund from the Government of India due and active management of the asset portfolio in recent years, Capricorn is well-positioned to continue delivery of its differentiated business model of returning value to shareholders whilst building sustainable cash flow generation and growth,” the update said.
As previously announced, Capricorn plans to return up to $700 million of the India tax refund proceeds to shareholders.
“Having consulted with shareholders on the capital return options, Capricorn has determined that, to provide flexibility to its shareholders, $500 million will be returned by way of a tender offer, whereby shareholders will be invited to tender some or all of their shareholding for purchase on terms that will be set out in a Circular to be posted to shareholders.
“It is intended that the remaining sum of up to $200 million will be returned by way of an ongoing share repurchase programme to provide a continuing value-accretive return of capital to shareholders,” it said.
Each of these returns is subject to shareholder approval.
On November 15, the Company had announced that it would commence a buyback programme. This was due to end on January 31, 2022, and has now been extended to run until the end of February 2022.
The attachment of Indian assets, including some flats in Paris, in July 2021 had triggered scrapping of a 2012 amendment to the Income Tax Act that gave taxmen powers to go back 50 years and slap capital gains levies wherever ownership had changed hands overseas but business assets were in India.
The tax department had used the 2012 legislation to levy Rs 10,247 crore in taxes on alleged capital gains Cairn made on the reorganisation of its India business before its listing in 2006-07.
Cairn contested such demand saying all taxes due when the reorganisation, which was approved by all statutory authorities, took place were duly paid.
But the tax department in 2014 attached and subsequently sold the residual shares that Cairn held in the Indian unit, which was in 2011 acquired by Vedanta group. It also withheld tax refunds and confiscated dividends due to it to settle part of the tax demand. All this totalled Rs 7,900 crore.
(This story has not been edited by NDTV staff and is auto-generated from a syndicated feed.)
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