Cairn Energy Wins Arbitration in Tax Spat With India

(Bloomberg) -- Cairn Energy Plc won an arbitration over tax dispute with Indian government, serving a double-blow to Prime Minister Narendra Modi’s government after a similar loss against Vodafone Group Plc.

An international arbitration tribunal ruled that India’s tax claim of $1.2 billion in past taxes was not a valid demand, people with knowledge of the matter said, asking not to be identified citing rules on speaking to the media. The tribunal has also asked India to pay the funds withheld along with the interest to the Scottish oil explorer for seizing dividend, tax refund and sale of shares to partly recover the dues. India can appeal.

A spokeswoman for the tax department did not answer a call made to mobile phone during business hours.

Cairn Energy’s victory will be a second loss for India in an international arbitration after Vodafone Group Plc won a years-long tax dispute with the Indian government in September over a controversial $3 billion tax demand. The Indian government’s 2012 budget retrospectively amended the tax code, giving itself the power to go after M&A deals all the way back to 1962 if the underlying asset was in India.

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