Government to appeal against Cairn ruling

NEW DELHI: Cairn Energy Plc’s pitch for an early settlement of its claims hasn’t cut ice with the government, which is all set to appeal against an international tribunal’s ruling in the $1.2-billion “retrospective tax” case.
Sticking to its accusation of Cairn having conducted transactions via tax havens to “evade” paying taxes in India, the government will also “strongly contest” cases filed by the British energy fir m in other international courts, sources said. Cairn has filed a case in a US district court to enforce the arbitration award, hoping that the move would put pressure on the tax department. But tax authorities appeared unmoved.
The statements come a day after Cairn CEO Simon Thomson met finance secretary Ajay Bhushan Pandey and Central Board of Direct Taxes chairman P C Mody to press for an early settlement, following the tribunal’s verdict in their favour.

Although the government has time until the third week of March to file an appeal, it seems to have made up its mind on the issue. But it is yet to comment on it officially.
“The government welcomes Cairn’s move to reach out for a resolution. However, any dispute resolution to be sought by Cairn will have to be within already existing laws,” a government source said. This means that the government is unwilling to accept the tribunal’s order, which held India guilty of not honouring its commitment under the bilateral investment treaty.
The government, however, believes that a tribunal’s ruling cannot override the legislature’s power to decide on tax matters — an argument it had made while appealing against a similar order in the Vodafone case, which had triggered the retrospective amendment.
But unlike the Vodafone case, where no tax has been deposited with the government, tax authorities have recovered a part of the claims by selling shares in India that had been attached.
There have been suggestions that Cairn could look to settle the case under the ‘Vivaad Se Vishwaas’ scheme, but it would have to cough up taxes, which it has argued is unfair. In fact, the company had managed to get British Prime Minister and other ministers to take up the issue with their Indian counterparts.

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