Jaitley unfazed by Cairn suit for $1 bn damages

20 Jan 2016

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The Indian government will "state its position" on the tax dispute with Cairn Energy before the relevant legal authority, finance minister Arun Jaitley said in London on Tuesday after the British oil explorer announced that it will seek over $1 billion in damages from India.

Cairn Energy plc on Tuesday said it will seek from India over $1 billion in damages for loss it suffered in value of its holding from a Rs10,247-crore tax demand raised on its eight-year-old internal business recognition.

India's income tax department had in January 2014, slapped a tax notice of over a $1.6-billion (over Rs10,000 crore) for the 2006-2007 fiscal year.

Jaitley made the remarks while responding to a question seeking his reaction to the British oil major's announcement of legal action over a Rs10,247 crore tax demand.

"There is a tax assessment order. I have also said earlier that there have been a number of proceedings in which some international investors had raised serious issues about some tax assessment orders. They have resorted to their own legal remedies which they think are available to them," Jaitley said.

"In some cases those orders have been passed and in some cases we have even accepted the judicial orders as final and put those issues to rest. As far as the government of India is concerned, we are also interested in the larger interest of investment environment to put to rest some of those issues which are pending," he said.

"So if a particular assessee resorts to a legal remedy, the government will state its position before that authority," he added.

The Income Tax Department using a retrospective legislation had in January 2014 issued a draft tax assessment order on Cairn Energy over its 2006 internal business reorganisation and barred it from selling its 9.8 per cent stake in Cairn India.

The draft order of the I-T department addressed to Cairn's subsidiary, Cairn UK Holdings Limited, included an amount of $1.6 billion and any applicable interest and penalties.

Cairn then filed a notice of dispute under the UK-India investment treaty in order to protect its legal position and shareholder interests.

The company also claims that since the original contact from the Income Tax Department in January 2014, it has continued to confirm with its tax advisors that it has abided by Indian tax laws throughout its history of operating in India and that the company has been fully compliant with the tax legislation in force in each year and paid all applicable taxes.

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