{"id":74240,"date":"2020-12-24T18:24:45","date_gmt":"2020-12-24T12:54:45","guid":{"rendered":"https:\/\/blog.forumias.com\/?p=74240"},"modified":"2021-02-05T10:56:03","modified_gmt":"2021-02-05T05:26:03","slug":"india-lost-retrospective-taxation-case-to-cairn","status":"publish","type":"post","link":"https:\/\/forumias.com\/blog\/india-lost-retrospective-taxation-case-to-cairn\/","title":{"rendered":"India lost Retrospective taxation case to Cairn"},"content":{"rendered":"<p><b><span data-contrast=\"none\">Synopsis:\u00a0<\/span><\/b><span data-contrast=\"none\">In a 2<\/span><span data-contrast=\"none\">nd<\/span><span data-contrast=\"none\">\u00a0setback after Vodafone case, Indian government has lost an\u00a0<\/span><span data-contrast=\"none\">I<\/span><span data-contrast=\"none\">nternational arbitration case to energy giant Cairn, on the issue of retrospective taxation.\u00a0<\/span><span data-ccp-props=\"{&quot;201341983&quot;:0,&quot;335551550&quot;:6,&quot;335551620&quot;:6,&quot;335559739&quot;:200,&quot;335559740&quot;:240}\">\u00a0<\/span><\/p>\n<p><b><span data-contrast=\"none\">Introduction<\/span><\/b><span data-ccp-props=\"{&quot;201341983&quot;:0,&quot;335551550&quot;:6,&quot;335551620&quot;:6,&quot;335559739&quot;:200,&quot;335559740&quot;:240}\">\u00a0<\/span><\/p>\n<ul>\n<li data-leveltext=\"\uf0b7\" data-font=\"Symbol\" data-listid=\"14\" aria-setsize=\"-1\" data-aria-posinset=\"41\" data-aria-level=\"1\"><span data-contrast=\"none\">The Indian government has lost an international arbitration case to energy giant Cairn Plc over the retrospective levy of taxes, and has been asked to pay damages worth RS. 8000\u00a0crore\u00a0to the UK firm.<\/span><span data-ccp-props=\"{&quot;134233279&quot;:true,&quot;201341983&quot;:2,&quot;335559739&quot;:200,&quot;335559740&quot;:300}\">\u00a0<\/span><\/li>\n<li data-leveltext=\"\uf0b7\" data-font=\"Symbol\" data-listid=\"14\" aria-setsize=\"-1\" data-aria-posinset=\"42\" data-aria-level=\"1\"><span data-contrast=\"none\">This is the second setback for Indian government related to retrospective taxation after it lost the arbitration case against Vodafone.<\/span><span data-ccp-props=\"{&quot;134233279&quot;:true,&quot;201341983&quot;:2,&quot;335559739&quot;:200,&quot;335559740&quot;:300}\">\u00a0<\/span><\/li>\n<\/ul>\n<p><b><span data-contrast=\"none\">What is retrospective taxation?\u00a0<\/span><\/b><span data-ccp-props=\"{&quot;201341983&quot;:0,&quot;335551550&quot;:6,&quot;335551620&quot;:6,&quot;335559739&quot;:200,&quot;335559740&quot;:240}\">\u00a0<\/span><\/p>\n<p><span data-contrast=\"none\">Retrospective taxation allows a country to pass a rule on taxing certain products, items or services and deals and charge companies from a time behind the date on which the law is passed.<\/span><span data-ccp-props=\"{&quot;201341983&quot;:0,&quot;335551550&quot;:6,&quot;335551620&quot;:6,&quot;335559739&quot;:200,&quot;335559740&quot;:240}\">\u00a0<\/span><\/p>\n<ul>\n<li data-leveltext=\"\uf0b7\" data-font=\"Symbol\" data-listid=\"15\" aria-setsize=\"-1\" data-aria-posinset=\"43\" data-aria-level=\"1\"><span data-contrast=\"none\">Countries use this route to correct any anomalies in their taxation policies that have, in the past, allowed companies to take advantage of such loopholes.<\/span><span data-ccp-props=\"{&quot;134233279&quot;:true,&quot;201341983&quot;:0,&quot;335551550&quot;:6,&quot;335551620&quot;:6,&quot;335559739&quot;:200,&quot;335559740&quot;:276}\">\u00a0<\/span><\/li>\n<\/ul>\n<p><span data-contrast=\"none\">Apart from India, many countries including\u202fthe USA, the UK, the Netherlands, Canada, Belgium, Australia and Italy\u202fhave retrospectively taxed companies.<\/span><span data-ccp-props=\"{&quot;201341983&quot;:0,&quot;335559739&quot;:200,&quot;335559740&quot;:276}\">\u00a0<\/span><\/p>\n<p><b><span data-contrast=\"none\">What is the case?<\/span><\/b><span data-ccp-props=\"{&quot;201341983&quot;:0,&quot;335559739&quot;:200,&quot;335559740&quot;:276}\">\u00a0<\/span><\/p>\n<p><span data-contrast=\"none\">The case pertains to the tax demand related to an alleged Rs24,500 crore worth capital gains it made in 2006 while transferring all its shares of Cairn India Holdings to a new company, Cairn India, and got it listed on the stock exchanges.\u00a0<\/span><span data-ccp-props=\"{&quot;201341983&quot;:0,&quot;335559739&quot;:200,&quot;335559740&quot;:276}\">\u00a0<\/span><\/p>\n<p><span data-contrast=\"none\">However, Cairn argued the retroactive application of a newly enacted law is a breach by India of its obligations under the Treaty<\/span><b><span data-contrast=\"none\">\u00a0[UK-India Bilateral Investment Treaty] t<\/span><\/b><span data-contrast=\"none\">o treat Cairn and its investments fairly and equitably and refrain from unlawfully expropriating Cairn\u2019s assets.\u202f<\/span><span data-ccp-props=\"{&quot;201341983&quot;:0,&quot;335559739&quot;:200,&quot;335559740&quot;:276}\">\u00a0<\/span><\/p>\n<ul>\n<li data-leveltext=\"\uf0b7\" data-font=\"Symbol\" data-listid=\"16\" aria-setsize=\"-1\" data-aria-posinset=\"44\" data-aria-level=\"1\"><span data-contrast=\"none\">Owing to different interpretations of capital gains, the company refused to pay the tax.<\/span><span data-ccp-props=\"{&quot;134233279&quot;:true,&quot;201341983&quot;:0,&quot;335559739&quot;:200,&quot;335559740&quot;:276}\">\u00a0<\/span><\/li>\n<li data-leveltext=\"\uf0b7\" data-font=\"Symbol\" data-listid=\"16\" aria-setsize=\"-1\" data-aria-posinset=\"45\" data-aria-level=\"1\"><span data-contrast=\"none\">This prompted cases being filed at the Income Tax Appellate Tribunal (ITAT) and the High Court.<\/span><span data-ccp-props=\"{&quot;134233279&quot;:true,&quot;201341983&quot;:0,&quot;335559739&quot;:200,&quot;335559740&quot;:276}\">\u00a0<\/span><\/li>\n<\/ul>\n<p><b><span data-contrast=\"none\">What is the verdict of Court?<\/span><\/b><span data-ccp-props=\"{&quot;201341983&quot;:0,&quot;335559739&quot;:200,&quot;335559740&quot;:276}\">\u00a0<\/span><\/p>\n<p><span data-contrast=\"none\">The <a href=\"https:\/\/forumias.com\/blog\/permanent-court-of-arbitration-pca\/\" target=\"_blank\" rel=\"noopener noreferrer\">Permanent Court of Arbitration<\/a> at The Hague has maintained that the Cairn tax issue is not a tax dispute but a tax-related investment dispute and, hence, it falls under its jurisdiction.<\/span><span data-ccp-props=\"{&quot;201341983&quot;:0,&quot;335559739&quot;:200,&quot;335559740&quot;:276}\">\u00a0<\/span><\/p>\n<ul>\n<li data-leveltext=\"\uf0b7\" data-font=\"Symbol\" data-listid=\"17\" aria-setsize=\"-1\" data-aria-posinset=\"46\" data-aria-level=\"1\"><span data-contrast=\"none\">India\u2019s demand in past taxes, it said, was in\u00a0<\/span><b><span data-contrast=\"none\">breach of fair treatment under the UK-India Bilateral Investment Treaty.<\/span><\/b><span data-ccp-props=\"{&quot;134233279&quot;:true,&quot;201341983&quot;:0,&quot;335559739&quot;:200,&quot;335559740&quot;:276}\">\u00a0<\/span><\/li>\n<li data-leveltext=\"\uf0b7\" data-font=\"Symbol\" data-listid=\"17\" aria-setsize=\"-1\" data-aria-posinset=\"47\" data-aria-level=\"1\"><span data-contrast=\"none\">The GOI was ordered to compensate for the total harm suffered together with interest and cost of arbitration.\u00a0<\/span><span data-ccp-props=\"{&quot;134233279&quot;:true,&quot;201341983&quot;:0,&quot;335559739&quot;:200,&quot;335559740&quot;:276}\">\u00a0<\/span><\/li>\n<\/ul>\n<p><span data-contrast=\"none\">The order does not contain a provision for challenge or appeal. Moreover, Cairn can use the arbitration award to approach courts in countries such as the UK to seize any property owned by India overseas to recover the money if the award is not honored.\u00a0<\/span><span data-ccp-props=\"{&quot;201341983&quot;:0,&quot;335559739&quot;:200,&quot;335559740&quot;:276}\">\u00a0<\/span><\/p>\n<p><b><span data-contrast=\"none\">Way forward-<\/span><\/b><span data-ccp-props=\"{&quot;201341983&quot;:0,&quot;335559739&quot;:200,&quot;335559740&quot;:276}\">\u00a0<\/span><\/p>\n<p><span data-contrast=\"none\">Government needs to assure<\/span><span data-contrast=\"none\">d<\/span><span data-contrast=\"none\">\u00a0global investors that concerns over retrospective taxation would be taken care of.<\/span><span data-ccp-props=\"{&quot;201341983&quot;:0,&quot;335559739&quot;:200,&quot;335559740&quot;:276}\">\u00a0<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Synopsis:\u00a0In a 2nd\u00a0setback after Vodafone case, Indian government has lost an\u00a0International arbitration case to energy giant Cairn, on the issue of retrospective taxation.\u00a0\u00a0 Introduction\u00a0 The Indian government has lost an international arbitration case to energy giant Cairn Plc over the retrospective levy of taxes, and has been asked to pay damages worth RS. 8000\u00a0crore\u00a0to the&hellip; <a class=\"more-link\" href=\"https:\/\/forumias.com\/blog\/india-lost-retrospective-taxation-case-to-cairn\/\">Continue reading <span class=\"screen-reader-text\">India lost Retrospective taxation case to Cairn<\/span><\/a><\/p>\n","protected":false},"author":61,"featured_media":74261,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"footnotes":""},"categories":[1230,1351,1310,9],"tags":[1308,1248,1574,1420],"class_list":["post-74240","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-9-pm-daily-articles","category-daily-news","category-daily-news-updates","category-public","tag-eco_0","tag-eco_01","tag-india_uk_relations","tag-ir_3","entry"],"jetpack_featured_media_url":"https:\/\/i0.wp.com\/forumias.com\/blog\/wp-content\/uploads\/2020\/12\/India-lost-Retrospective-taxation-case-to-Cairn.jpg?fit=1280%2C720&ssl=1","views":{"total":0,"cached_at":"","cached_date":1700521458},"jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/74240","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/users\/61"}],"replies":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/comments?post=74240"}],"version-history":[{"count":0,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/74240\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/media\/74261"}],"wp:attachment":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/media?parent=74240"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/categories?post=74240"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/tags?post=74240"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}