The Centre is facing another international challenge to its policy of retrospective tax amendments. Earlyguard, a British subsidiary of Japanese behemoth Mitsui & Co. Ltd. has initiated arbitration proceedings under the India-UK Bilateral Investment Treaty after income tax authorities raised a demand of Rs 2,400 crore regarding a transaction that took place in 2007.
Earlyguard had commenced the arbitral procedure in February this year and Mitsui & Co. has divulged the details in its financial results, announced earlier this month.
Rs 2,400 crore is demanded by the Indian tax authorities as capital gains pertaining to a 2007 transaction where the company offloaded the shares of a British company, Finsider International which held a 51% stake in Sesa Goa Iron Ore, a Vedanta Group company, the Times of India reported.
The tax notice was reportedly received in January 2020. Mitsui & Co. stated in its disclosure that "although Earlyguard treated the capital gain properly according to the tax laws at that time, the payment notice has been issued."
Meanwhile, Cairn Energy has threatened to seize Indian assets overseas in the event of the Centre failing to return over $1.7 billion the arbitration tribunal has ordered after repealing a retrospective tax demand.
Companies comprising Cairn Energy and Earlyguard have alleged violations of bilateral investment treaties between India and the UK. Whereas the Indian government has contended that it is the country's sovereign right to impose taxes.
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