Govt accepts Cairn’s offer on retro tax: Firm to withdraw cases now, refund to follow

Meeting the requirements of the new legislation that scraps levy of retrospective taxation, the company had earlier this month given required undertakings indemnifying the Indian government against future claims as well as agreeing to drop any legal proceedings anywhere in the world.

The government has now accepted this and issued Cairn a so-called Form-II, committing to refund the tax collected to enforce the retrospective tax demand, two sources with direct knowledge of the development said.

Following the issuance of Form-II, Cairn will now start withdrawing all cases in international courts.

Once this is complete, the company will be issued a Rs 7,900 crore refund, they said, adding the withdrawal of cases may take up to three-four weeks. While a Cairn spokesperson did not immediately respond to requests for comments, a senior finance ministry official confirmed the government accepting the company’s undertakings.

Seeking to repair India’s damaged reputation as an investment destination, the government in August enacted new legislation to drop Rs 1.1 lakh crore in outstanding claims against multinationals such as telecom group Vodafone, pharmaceuticals company Sanofi and brewer SABMiller, now owned by AB InBev, and Cairn.

About Rs 8,100 cr collected from companies under the scrapped tax provision are to be refunded if the firms agreed to drop outstanding litigation, including claims for interest and penalties. Of this, Rs 7,900 cr is due only to Cairn.

Subsequently, the Centre last month notified rules that when adhered to will lead to the Centre withdrawing tax demands raised using the 2012 retrospective tax law and any tax collected in the enforcement of such demand being paid back.

For this, firms had to indemnify the Centre against future claims and withdraw any pending legal proceedings.