Cairn India on Wednesday withdrew its suit challenging the validity of the controversial 2012 retrospective amendment to the Income Tax Act that imposed tax liabilities on several high-profile offshore transactions of Indian assets including Cairn?s, reports Kaushal Shroff in New Delhi. By withdrawing the petition, analysts said, it is making an attempt to get the benefit of a proposed new arbiter for fresh tax demands under the law for retrospective taxation. Finance minister Arun Jaitley in his Budget proposed to set up a high-level CBDT committee that would analyse and determine what needed to be taken up in respect of all ?fresh cases? arising out of the retrospective activity of the law. In Cairn?s case a show-cause notice has been issued, but no tax demand has yet been made.
The energy major would like its 2007 restructure of Indian assets to be reviewed by the panel. CBDT chairman RK Tewari recently said only fresh cases coming to the notice of assessing officers would go to the committee.
Meanwhile, the company also managed to secure the liberty to approach the court in case its interest is affected by the tax department.
Earlier, in May Cairn had challenged the retrospective amendment following an order of the department attaching Cairn Energy?s 10.3% stake in Cairn India ? the Scottish oil giant?s only remaining asset in India after selling its Indian business to UK?s Vedanta Resources. (Vedanta retained Cairn India?s name after the $8.7-billion deal in 2007.)
The shares were attached after Cairn UK Holdings recently filed a ?no income? return in India in response to a show-cause notice issued by the I-T authorities relating to Cairn?s transfer of Indian assets to the then newly-formed Cairn India from certain offshore entities in Jersey in 2006-07. Authorities claim the transaction led to capital gains in the hands of Cairn UK Holdings, which is taxable in India.
Cairn?s move comes close on the heels of Netherlands-based Vodafone International Holdings issuing a fresh notice to India seeking international arbitration to resolve a Rs 20,000-crore tax demand it is facing on its purchase of Hutch-Essar seven years ago.
In its Budget, the government had said that existing litigation ? for instance, Pasteur Holdings? 2009 acquisition of Shantha Biotech ? against the retrospective tax is something it expected the courts to resolve.