Including Vodafone, Cairn .. a Controversial 2012 law removal plan!
Today, The cabinet of India admitted the repeal of the controversial 2012 law that taxes 15 companies, including Vodafone and Cairn.
A new bill thus repealing the tax says that Cairn, Vodafone, and other companies can get back everything they paid to the government without interest.
Fifteen companies, including Vodafone Idea and Cairn, could benefit greatly from this.
Vodafone collapse
The government’s announcement follows a letter from billionaire Kumar Mangalam Birla to the government seeking a 27% stake in him, which he left the Vodafone Group. Following this, its share price also fell sharply. Thus its market value and most market capitalization have seen the worst decline.
Defeat to India
Cairn and Vodafone have filed lawsuits against the tax in international courts. In both cases, India lost. In both cases, the international arbitral tribunal in the Netherlands ruled that India should no longer make any attempt (the alleged tax liability or any interest and or penalties) to recover the alleged tax liability or interest and penalty.
Hatch – Vodafone
The case was appealed in December of the previous year. As a result, India lost the case against Vodafone in September last year. Vodafone bought a 67% stake in Hutchison Wambo in 2007 for $ 11 billion. It is noteworthy that the government had demanded Rs 11,000 crore in taxes in this regard.
What is the verdict of the tribunal?
In this case, the tribunal ruled that the imposition of tax liability and interest and penalties on Vodafone violated the investment agreement between India and the Netherlands. The tribunal also ordered the government to pay Vodafone partial compensation of Rs 40 crore for legal costs.
The Supreme Court ruled in favor of Vodafone in 2012, but later in the year, the government changed the rules to tax contracts that had already been finalized.
This is the argument of the state
The Rs 11,000 crore tax demanded by the government is said to have been generated from the Indian company Hutchison Whampoa, which was last acquired in 2007. It was argued that Vodafone, which had acquired the company on behalf of the government, should pay for it.
Cairn Energy
Similarly, in the conflict against the British oil company Cairn, India lost for the second time in an international tribunal. This is because the Government of India ruled that the tax on Cairn Energy was invalid.
What the verdict is?
He was also ordered to pay a total of about Rs 9,000 crore in interest on the sale of shares owned by Cairn Energy, including dividends, dividends of Rs 1,590 crore owed to Cairn Energy, and court costs and fines.
Why Capital Gains Tax?
Profit earned on the sale of a property in India is treated as profit and is subject to capital gains tax. But to avoid this, foreign companies operating in India make their payments abroad. Thus avoiding paying taxes in India. To clarify this, the Government of India amended the Income Tax Act in 2012.
pay taxes to India
According to this, even if the sale or purchase of capital shares related to the transfer of companies operating and holding assets in India is done by foreign companies, capital gains tax is payable to the Government of India.
Property of Cairn Energy
Cairn Energy also owned assets in India, including the Rajasthan oil field. They were owned by Cairn India Holdings. But Cairn India Holdings was registered in the Cayman Islands. It is a subsidiary of Cairn UK Holdings. The same Cairn UK Holdings is a company owned by Cairn Energy.
Cairn India Stock
Cairn UK, which is preparing to sell its shares in the stock market, has transferred its stake in Cairn India Holdings to Cairn India. Assets in India were transferred to Cairn Energy for this new company. In return, Cairn India acquired a 69% stake in Cairn UK.
