Cairn Energy asks government to walk the talk on retro tax
London: Weeks after being slapped with a Rs 29,000 crore ‘retrospective tax demand’, British oil
explorer Cairn Energy on Sunday said international investors want the Modi government to walk the talk
on resolving retrospective tax issues and send a clear signal that things are changing.
Cairn, which gave India its biggest inland oil discovery that now accounts for a fifth of the country’s oil
production, said it will continue to press ahead with the arbitration challenging use of a new legislation
to tax internal business reorganisation with retrospective effect and will seek $1 billion in damages to its
value.
“The international investment community wishes to see India doing as it has stated in looking to resolve
the retrospective tax issue with actions which would send a positive signal to global investors that things
are changing under this current government,” Cairn Energy CEO Simon Thomson told PTI in an interview
in London.
The income tax department in February slapped on Cairn Energy a tax demand notice of over Rs.29,000
crore, including Rs.18,800 crore in back dated interest. The department had on 22 January, 2014, issued
a draft assessment order of Rs.10,247 crore on alleged capital gains the company made in a 2006
reorganisation of its India business.
Two years later, it issued a final assessment order. The actions of the income tax department have been
hugely detrimental to Cairn’s business and its UK and international shareholders, Thomson said.
“The issuing of a retrospective tax assessment is very disappointing and follows a long period of
engagement with the Government of India which has repeatedly given public assurances that it would
not resort to retrospective tax measures, introduced by the previous government, given the negative
message it sends to the international investment community,” he said.
Thomson said Prime Minister Narendra Modi had earlier this year stated that retrospective tax is a
matter of the past and he was ensuring that this government and future governments cannot open this
chapter.
Modi, he said, had stated that “We have clearly articulated that we will not resort to retrospective
taxation and demonstrated this position in a number of ways.”
“However, Cairn Energy’s outstanding retrospective tax case is yet to be resolved and the matter has
been ongoing for more than two years and is having a major detrimental impact on our business and to
our UK and international shareholders,” Thomson said.He said the tax issue was a very unfortunate
conclusion to a 20 year investment in India where “Cairn Energy has been a model corporate citizen and
created a legacy asset which is seen as an example of what can be achieved through India and UK
cooperation”.
https://www.livemint.com/Companies/bBTyIMvYdW6GuHpF7w0UDJ/Cairn-Energy-asks-government-