New Delhi: UK-based Cairn Energy Plc on Tuesday signalled that it is ready to settle the long-running retro tax dispute with India which will enable it to get refunds of Rs 7,900 crore (US 1.06 billion dollars).
Cairn said that payment of the tax refund would enable a proposed return to shareholders of up to US 700 million dollars via a special dividend of US 500 million dollars and a share buyback programme of up to the US 200 million dollars.
The remainder of the proceeds would be allocated to further expansion of the low cost, sustainable production base.
The development has come days after India notified draft rules to implement the recent amendment in Income Tax Act to scrap retrospective tax provisions.
‘Progress in resolving our Indian tax issue and active portfolio management leave Cairn well-positioned to deliver growth from a sustainable business, focused on generating further value and returns for shareholders,’ said Simon Thomson, Chief Executive, Cairn Energy Plc in an official statement.
The British oil major is the first company out of about 17 which has publicly announced to settle the retro tax dispute after the government brought the necessary amendment last month.
As required by the amended tax law, Cairn would be required to withdraw its international arbitration award claim, interest and costs and to end all legal enforcement actions in order to be eligible for the refund.
The Group said that it is considering entering into statutory undertakings with the Government of India in respect of new legislation which would enable the refund of retrospective taxes collected from Cairn in India by way of asset seizures since 2014 totaling Rs 7,900 crore.
“The final form of these statutory undertakings has yet to be published by the Government of India, but it is anticipated that the principal condition that they prescribe will be the withdrawal of Cairn’s rights under the international arbitration award,” Cairn said.
As the Group has not yet entered into any such undertakings, Cairn’s receivable under the award of the international arbitration remained classified as a contingent asset at the 30 June balance sheet date, it added.
