India has filed an appeal against the Cairn arbitration award on the grounds of the sovereign right to tax, sources informed CNBC-TV18.

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India is of a firm view that as a sovereign it has a right to tax and can not allow tax evasion, sources said.

Last month, Minister of State for Finance Anurag Singh Thakur had told Lok Sabha that the Cairn arbitration award was ”under consideration of the government.”

Cairn Energy had in 2011, sold Cairn India to mining billionaire Anil Agarwal’s Vedanta Group, barring a minor stake of 9.8 percent. It wanted to sell the residual stake as well but was barred by the I-T department from doing so. The government also froze the payment of dividends by Cairn India to Cairn Energy,

In December, an international tribunal had unanimously ruled that India violated its obligations under the UK-India Bilateral Investment Treaty in 2014 when the income tax department had slapped a Rs 10,247-crore tax assessment using legislation that gave it powers to levy taxes retrospectively.

Soon after seeking Rs 10,247 crore in taxes over alleged capital gains made by the company over a 2006-07 reorganization of India business before its listing, the tax department seized Cairn’s residual 10 percent stake in Cairn India. In a ruling, which Cairn had previously described as ”final and binding”, the tribunal had ordered India to pay $1.2 billion in damages, plus interest and costs, to compensate Cairn for the shares long sold off by the tax department as well as confiscated dividends and withheld tax refunds. This totals to $ 1.4 billion, according to news agency PTI.

First Published:Mar 24, 2021 8:32 AM IST