Weeks after being slapped with a Rs 29,000-crore ‘retrospective tax demand’, British oil explorer Cairn Energy today said international investors want the Modi government to walk the talk on resolving retrospective tax issues and send a clear signal that things are changing.
Cairn, which gave India its biggest on-land oil discovery that now accounts for a fifth of the country’s oil production, said it will continue to press ahead with the arbitration challenging use of a new legislation to tax internal business reorganisation with retrospective effect and will seek $1 billion in damages.
“The international investment community wishes to see India doing as it has stated in looking to resolve the retrospective tax issue with actions which would send a positive signal to global investors that things are changing under this current government,” Cairn Energy CEO Simon Thomson told PTI in an interview here.
The Income Tax Department in February slapped on Cairn Energy a tax demand notice of over Rs 29,000 crore, including Rs 18,800 crore in back dated interest.
The Department had on January 22, 2014, issued a draft assessment order of Rs 10,247 crore on alleged capital gains the company made in a 2006 reorganisation of its India business. Two years later, it issued a final assessment order.
The actions of the Income Tax Department have been hugely detrimental to Cairn’s business and its UK and international shareholders, Thomson said.
“The issuing of a retrospective tax assessment is very disappointing and follows a long period of engagement with the Government of India which has repeatedly given public assurances that it would not resort to retrospective tax measures, introduced by the previous government, given the negative message it sends to the international investment community,” he said.
Thomson said Prime Minister Narendra Modi had earlier this year stated that retrospective tax is a matter of the past and he was ensuring that this government and future governments cannot open this chapter.
Modi, he said, had stated that “We have clearly articulated that we will not resort to retrospective taxation and demonstrated this position in a number of ways.”
“However, Cairn Energy’s outstanding retrospective tax case is yet to be resolved and the matter has been ongoing for more than two years and is having a major detrimental impact on our business and to our UK and international shareholders,” Thomson said.
He said the tax issue was a very unfortunate conclusion to a 20-year investment in India where “Cairn Energy has been a model corporate citizen and created a legacy asset which is seen as an example of what can be achieved through India and UK cooperation”.