The tax dispute dates back to 2006-07 when Cairn UK transferred shares of Cairn India Holdings to its Indian arm, Cairn India. It eventually exited the Indian market in 2011.
Oil and gas refiner Vedanta reiterated on Saturday that their subsidiary, Cairn Oil and Gas is a separate entity that is in no manner connected with Scottish oil and gas explorer, Cairn Energy PLC. Vedanta added with Cairn Oil and Gas, formerly known as Cairn India Limited, has nothing to do with the Scottish refiner's retrospective tax dispute case.
The Indian refiner informed that it would discontinue the use of the brand name 'Cairn' as part of its corporate identity by December 2021.
Cairn India Limited was taken over by the Vedanta Group after the Scottish oil and gas company exited the Indian market in 2011. Cairn India was later merged into Vedanta in 2017. As per the Indian refiner, since then both the companies have been operating as separate legal entities with different promoters and shareholders.
“When Cairn Energy PLC exited its Indian operations in 2011 after selling its stake to Vedanta Group, it continued to use the brand name ‘Cairn’ though the brand ‘Cairn’ is owned by Vedanta Limited (erstwhile Cairn India Limited). At Vedanta, we have since then extensively invested in the company and expanded its footprint across the length and breadth of the country," said CEO of Vedanta, Sunil Duggal.
Cairn Energy PLC has a long-running tax dispute with the Government of India. The company had announced in November 2020 that it had entered into an undertaking with the sovereign which involves a refund of $1.06 billion in exchange for the Scottish oil and gas company dropping all legal proceedings against the country.
The Cairn dispute predates to 2006-07 when Cairn UK had transferred shares of Cairn India Holdings to its Indian arm, Cairn India. Tax authorities in India inferred that the Scottish refiner made capital gains and was liable to pay capital gains tax. The company refused to do so. The erstwhile UPA-government found several multinationals including Vodafone PLC and Cairn liable to pay the capital gains tax.
Retrospective taxation was introduced in 2012. This made any capital gains resulting from the transfer of shares by an entity outside of India with assets located in the country taxable from 1962.
The Indian Government recent amendment to Tax Amendment Rules nullified the tax assessment put up against the Scottish refiner in January 2016. It ordered the refund of Rs 7,900 Crore levied on Cairn.
The idea behind the amendment was to compensate multinationals and to repair the country’s image of being tax-unfriendly for foreign businesses.