The Permanent Court of Arbitration ruled that the Indian government was wrong in applying the retrospective tax on Cairn

Ticker

6/recent/ticker-posts

The Permanent Court of Arbitration ruled that the Indian government was wrong in applying the retrospective tax on Cairn

The Permanent Court of Arbitration, which has now ruled that the Indian government was wrong in applying the retrospective tax on Cairn

The Permanent Court of Arbitration, which has now ruled that the Indian government was wrong in applying the retrospective tax on Cairn in its ruling the international arbitration court has said that the Indian government must pay, roughly around 8000 crores, in damages to the Cairn. In this particular backdrop, let us try and understand what is this dispute all about. Like Vodafone, the dispute between the Indian government and Cairn also relates to retrospective taxation. In the year 2006 and 2007, as part of internal rearrangement Cairn, the UK transferred shares of Cairn India holdings to Cairn India. So what exactly this whole issue about this is about capital gains tax. So what is this capital gains tax? For example, we have capital. It can be a property, or it can be an industry, it can be a building when we are selling this particular capital asset. We also get a profit. So based on the profit, that we generate, we are supposed to pay a certain amount to the Government of India, so that particular amount is called the capital gains tax. In this scenario ideally, Cairn was supposed to pay some capital gains, to the Government of India. But, had not paid the capital tax. And as a result, the Government of India imposing this particular taxation in a retrospective effect. What exactly happened after this issue. We have the Government of India, and this was a case against Cairn as well. So what they approach is the income tax appellate tribunal once they hit the income tax Appeal Tribunal. This goes in favor of the government. So this income tax appellate tribunal requested that Cairn has to pay some amount in the form of capital tax to the government. Then it goes to the High Court of Delhi and now, the proceedings are being conducted, and it is still pending before the Delhi High Court because this happens to be one A taxation issue the other is about the investment issue. Why, because this happens to be an investment issue between India, as well as the United Kingdom. As a result, Cairn as a company approaches the Permanent Court of Arbitration. So what does the Permanent Court of Arbitration rule, the Permanent Court of Arbitration has said that this is not related to tax alone, but this is about the dispute. Since it is about the dispute. They have approached international arbitration, and now they have ruled in favor of Cairn. And they have said that the government in this case has breached the guarantee of fair and equitable treatment. It has further gone on to say that all the money is taken by the government during this particular procedure may have to be returned. Why during the pendency of the arbitration this company became one of the first companies where the government took action to recover the retrospective tax amount from Cairn, as a company. So during the pendency of the arbitration, the government sold Cairn's near 5% holding in Vedanta limited sees dividends, totaling about 1140 growth, due to it from shareholding and set of 1590 crore tax refund against the demand as well. In this particular backdrop, the tribunal has ordered the government to desist any further action against Cairn and has also requested the government to provide back the tax refunds withheld to recover the tax demand.

So what is the major impact right now? The major impact is that the Government of India is planning to pull companies as well as countries towards India and is wanting to improvise on the ease of doing business. We have controversies concerning Vodaphone. We recently had labor issues concerning Bestron and now, we also have the Cairn judgment, made by the Permanent Court of Arbitration. All these cases reveal that the ease of doing business, which the government is planning to enhance is not working effectively in favor of the government. So this will also put the country in a gray area where countries and companies will be hesitant to come and engage in India, too expand their businesses. So, we have to understand in this particular case is that the ease of doing business can become a major problem when it comes to India, and the investments that the government is expecting may not be tuned up.

The government has also responded, where the finance ministry has said that it will consider all the options, including the legal options

Post a Comment

0 Comments