Cairn Energy UK entreats compensation from India

Cairn Energy UK, has sought a compensation of USD 5.6 billion from the Indian Government for raising a retrospective tax demand of Rs 29,047 crore on 10-year old internal reorganisation of its India unit. Compensation is for the loss, Cairn India suffered when Income Tax Department raised the tax demand in January 2014.

British explorer Cairn Energy has filed a claim of 160 pages to the international arbitration panel on June 28. The company has sought a withdrawal of the tax demand and has declared that India has "failed to uphold its obligations" under the UK-India Investment Treaty by not giving its investments in the country a fair and equitable treatment.

The total compensation sought is equal to the tax demand raised and the value of Cairn Energy's 9.8 per cent shareholding in Cairn India.

Income Tax Department in January 2014 slapped a draft tax assessment of Rs 10,247 crore on Cairn Energy on alleged capital gain it made when it in 2006 transferred its India assets to a new subsidiary, Cairn India and listed the firm.

The British firm sold majority stake in Cairn India to Vedanta Resources in 2011 but still holds 9.8 per cent stake in the company, which was attached by Income Tax Department. The Indian government will file its 'Statement of Defence' by November and the hearing is expected to commence in early 2017.