The following article is based on my own interpretation of the said events. Any material borrowed from published and unpublished sources has been appropriately referenced. I will bear the sole responsibility for anything that is found to have been copied or misappropriated or misrepresented in the following post.
Anjani Sinha, MBA 2014-16, Vinod Gupta School of Management, IIT Kharagpur.
On the 12th of March, 2015, The Business Today published news about the Income tax department ,which sent a 20,495 crore tax demand notice to Cairn India .This tax is in lieu with their failure to deduct the withholding tax on the alleged capital gains made during 2006 and 2007, by the erstwhile promoter Cairn Energy. There had been a transaction of CUHL (Cairn UK Holding Limited) transferring shares of CIHL (Cairn India Holding Limited) to Cairn India to facilitate reorganization of the subsidiary group in 2006-2007.
Cairn claims that it was fully compliant with all the income tax laws, and had completed all the tax procedures in 2006-07.If Cairn has a reasonable claim, it is highly exasperating on our part to refuse logical investment, and drive away foreign investors.
Cairn is yet another company to enter the league of other multinational firms like Vodafone Group and Royal Dutch Shell, to face tax demand owing to a retrospective tax law. Retrospective taxation (policy which is to take effect on a case that took place even before the law was passed) has always been a debatable topic .These laws as unjust and should be forbidden by any constitution .Retrospective tax laws would discourage future investors and restoring investors trust should be a priority for India.