New Delhi: Losing an international arbitration case to British explorer Cairn Energy Plc over tax dispute, India has been ordered to return over $1.2 billion to the energy giant along with interest and costs. The international arbitration tribunal ruled that India’s tax claim of Rs 10,247 crore in past taxes over a 2006-07 internal reorganisation of Cairn’s India business was not a valid demand. Also Read - Income Tax Returns: Can You Save Tax by Gifting Money to Parents, Kids? Yes You Can | Here’s How  

Releasing a statement, Cairn Energy said the tribunal has awarded damages of $1.2 billion along with interest and costs. Also Read - Effort is to Make Tax System Seamless, Painless, Faceless, Says PM Modi; Unveils New Tax Reforms

The Finance Ministry said: “The government will be studying the award and all its aspects carefully in consultation with its counsels. After such consultations, the government will consider all options and take a decision on further course of action, including legal remedies before appropriate fora.” Also Read - Twitter Tells Karnataka's Authority for Advance Rulings to Take Its 'Hands Off Porotta' After 18 Percent GST Ruling on Flatbread

Cairn’s claim was brought under the terms of the UK-India Bilateral Investment Treaty, the legal seat of the tribunal was the Netherlands and the proceedings were under the registry of the Permanent Court of Arbitration.

Cairn Energy had in 2010-11 sold Cairn India to Vedanta. Post the merger of the two in April 2017, the UK firm’s shareholding in Cairn India was replaced by a shareholding of about five per cent in Vedanta issued together with preference shares.

Along with attaching its shares in Vedanta, the tax department seized dividends of around Rs 1,140 crore due to it from the shareholdings and set-off a Rs 1,590-crore tax refund against the demand.

In 2015, Cairn initiated an international arbitration to challenge retrospective taxation.

The development comes as a major setback for the Indian government after Vodafone Group Plc had won an international arbitration case against the Indian government in September.

(With Agency Inputs)