Cairn Energy, a British company, has reported a net half-yearly loss of $500 million and attributed it as a direct result of action of the Indian Income Tax (I-T) Department on the retrospective tax matter, which has now been ongoing for almost five years.
The final arbitration hearings were held in August in The Hague and involved testimony by expert and fact witnesses and addressed Cairn’s claims under the U.K.-India Bilateral Investment Treaty, India’s defences and issues of jurisdiction.
The Income Tax Department has continued to enforce its retrospective tax claim against Cairn whilst the Treaty arbitration has been ongoing, said Cairn in a statement, adding that to date the I-T Department has seized dividends due to Cairn from its shareholding in Vedanta Limited totalling approximately $162 million and it has offset a tax rebate of $234 million due to Cairn as a result of overpayment of capital gains tax on a separate matter.
During the period, the I-T department seized proceeds from a 2% sale of Cairn’s shareholding in Vedanta Limited, realising $231 million. Subsequent to H1, a further 1% shares were sold. Following these sales, Cairn’s retained holding in Vedanta Limited is now 2%, said Cairn statement.
Cairn is seeking full restitution for losses totalling more than $1.4 billion resulting from India’s expropriation of its investments in India in 2014, and India’s unfair and inequitable treatment of those investments, due to the imposition of retrospective tax measures.