India refunds Rs 7,900 crore to Cairn to settle retro tax dispute

The Indian government has paid Cairn Energy Plc Rs 7,900 crore to refund taxes it had collected to enforce a retrospective tax demand, ending a seven-year-old dispute that had tarred the country’s image as an investment destination.

The company, which is now known as Capricorn Energy PLC, in a statement said it has received “net proceeds of USD 1.06 billion”, of which nearly 70 per cent will be returned to the shareholders.

The tax department had used a 2012 legislation, which gave it powers to go back 50 years and slap capital gains levies wherever ownership had changed hands overseas but business assets were in India, to seek Rs 10,247 cr in taxes from Cairn. In 2006-07, Cairn reorganised its India business, comprising operations of prolific Rajasthan oilfields, prior to its listing on stock exchanges.