Britain’s Cairn Energy said on Tuesday it has complied with all the rules of the retro-tax repeal law to now be eligible for about Rs 7,900 crore refund of taxes collected from it to enforce a retroactive tax claim.
As part of the settlement reached with the government in the seven-year-old dispute over the levying of back taxes, the company – now known as Capricorn Energy PLC – has withdrawn all cases brought to collect the tax refund that was ordered by an international arbitration tribunal after retroactively withdrawing the demand increase, according to an advertisement it placed in Indian newspapers on Wednesday.
The government had initially refused to honor the December 2020 arbitration ruling, but a law passed in August 2021 to retroactively delete all tax returns and refund the money collected, after dealing with asset prospects – ranging from flats used by its diplomatic staff in Paris and Air India planes in the US – are seized in order to recover the refund owed.
“The company has taken all necessary steps under the rules of the India Taxation (Amendment) Act 2021 required for the payment by the Government of India of a tax refund of approximately Rs 7,900 crore,” the company said in an operational and trade update. “Payment is expected to take place in early 2022.” The company started on November 26, 2021, proceedings to withdraw lawsuits it had filed in several jurisdictions to enforce an international arbitration decision, which overturned the levy of Rs 10,247 crore retrospective taxes and ordered India to withdraw the money already collected. to pay back.
First, the lawsuit filed in Mauritius for the recognition of the arbitral award was withdrawn, followed by similar actions in the courts in Singapore, the UK and Canada.
On December 15, it requested and was granted “voluntary resignation” from a lawsuit it filed in a New York court to seize Air India assets in order to recover money owed from the government. On the same day, it made a similar move in a Washington court, where it sought recognition of the arbitral award.
Recognition of the arbitral award is the first step before an enforcement procedure, such as attachment of assets, can be initiated.
The critical lawsuit in a French court, which linked Indian properties to Cairn’s application, was subsequently withdrawn and the one in the Netherlands also lapsed.
The company then filed a Form 3 with the Income Tax Department, allowing the government to proceed to the final stage of issuing Form 4 of its commitments.
Form 3 is an application describing the withdrawn cases. Issuing Form 4 would result in a tax refund.
“With the Government of India tax refund and active asset portfolio management in recent years, Capricorn is well positioned to continue to deliver its differentiated business model to return value to shareholders while building sustainable cash flow generation and growth said the update.
As previously announced, Capricorn plans to return up to $700 million of the proceeds from the Indian tax refund to shareholders.
“After discussing the options for capital return with shareholders, Capricorn has determined that, in order to provide flexibility to its shareholders, $500 million will be returned through a takeover bid, where shareholders will be invited to buy some or all of their shareholding. for purchase under conditions to be set out in a circular to be made known to shareholders.
“It is envisioned that the remaining amount of up to $200 million will be returned through an ongoing share buyback program to provide shareholders with a continued value-enhancing return of capital,” it said.
Each of these returns is subject to shareholder approval.
On November 15, the company announced that it would initiate a buyback program. This was supposed to end on January 31, 2022 and has now been extended until the end of February 2022.
The seizure of Indian assets, including some Paris flats, in July 2021 had led to the repeal of a 2012 amendment to the Income Tax Act, which gave taxpayers the power to go back 50 years and levy capital gains taxes where property is owned. had changed hands abroad, but assets were in the Indies.
The tax authorities had used the 2012 legislation to levy Rs 10,247 crore in taxes on alleged capital gains made by Cairn in the reorganization of its Indian operations before its IPO in 2006-07.
Cairn disputed such a claim, saying that all taxes due when the reorganization, which had been approved by all legal authorities, had been duly paid.
But in 2014, the IRS seized and sold Cairn’s remaining shares in the Indian unit, which was acquired by the Vedanta group in 2011. It also withheld tax refunds and seized dividends it received to settle part of the tax claim. All this amounted to Rs 7,900 crore.
(This story was not edited by DailyExpertNews staff and was generated automatically from a syndicated feed.)