Vedanta Settles Retrospective Tax Dispute With India
Vedanta Ltd. and its group entities have settled the retrospective tax dispute with the Indian government following the amendments to the income tax law.
The dispute stemmed from the 2012 amendment. It made transactions by non-residents involving the transfer of shares of an overseas company, deriving substantial value from assets in India, taxable on a retrospective basis as far back as 1961.
Using this retrospective provision, the government raised a tax demand on Cairn UK Holdings Ltd. for alleged capital gains it made in the 2006 business reorganisation of its Indian holdings. Cairn Energy Plc. and Vedanta, which acquired Cairn India from the Scottish firm in 2011, initiated separate arbitration proceedings against the tax demands.
In August this year, the parliament passed the Taxation Laws (Amendment) Act, 2021 that nullified the retrospective provision. Vedanta has now withdrawn all legal proceedings—domestic and international—against the government, the mining conglomerate said in an exchange filing.
The income tax appeal pending before the Delhi bench of the Income Tax Appellate Tribunal.
The writ petition before the Delhi High Court.
Vedanta Resources Ltd., Vedanta's parent, has also filed the application seeking withdrawal of the claim and termination of the arbitral proceedings pending before the Permanent Court of Arbitration in the International Court of Justice.
Vedanta, along with its related group entities, have filed the required statutory forms and undertakings, which have been accepted by the jurisdictional commissioner. Accordingly, a certificate has been issued to the company, the exchange disclosure said.
As is required by the rules framed under Taxation Laws (Amendment) Act, 2021, Vedanta and its related group entities and parties have declared that:
They forever irrevocably forgo any reliance on any right and provisions under any award, judgment, or court order.
Complete release of the Republic of India and any Indian affiliates with respect to any award, judgment, or court order [in the tax cases].
Indemnity against any claims brought against the Republic of India or any India affiliate, contrary to the release.
Any award, judgment, or court order [pertaining to the tax case] will be treated as null and void and without legal effect. The company will not take any action or initiate any proceeding or bring any claim based on that.
Last month, Cairn Energy Plc had said that it has entered into negotiations with the Indian government to end its multiyear tax spat.