After Cairn Energy, Mitsui arm moves arbitration court against India's tax demand of Rs 2,400 crores

New Delhi has filed an appeal against the order but the UK based Energy firm has started identifying Indian assets overseas, including bank accounts [File image: Cairn Energy]

In another defiance move, the Indian government is facing a fresh challenge against the retrospective tax amendment from Earlyguard ltd, a British subsidiary of a Japanese company Mitsui & Co. Ltd.

Earlyguard moved the arbitration proceedings in February and Mitsui & Co. has now disclosed the details in its financial results, declared earlier in May, said a report by The Times of India.

The Indian tax authorities raised a demand of Rs 2,400 crores in capital gains related to a 2007 transaction where the company sold the shares of a British company, Finsider International which owned a 51 percent stake in Sesa Goa Iron Ore, a Vedanta Group company.

Reportedly, the tax notice was received in January 2020. Mitsui & Co. noted in its disclosure that Earlyguard treated the capital gain "properly according to the tax laws at that time," the report added.

After winning the appeal in an arbitration tribunal in The Hague, Cairn Energy has threatened to seize Indian sovereign assets overseas which it can do so in the event of New Delhi failing to return over $1.7 billion that the arbitration tribunal has ordered after rescinding a retrospective tax demand.

After Vodafone won the tax appeal in the Supreme Court, the parliament amended the tax laws retrospectively to levy tax on the sale outside India related to assets in India. At the time, the sale of Hutch Whampoa’s 67 percent stake in the Indian telecom, to Vodafone was one of the largest deals carried out in the country.

However, companies including Cairn Energy and Earlygurd have claimed violation of bilateral investment treaties between India and the UK. The Indian government has argued that it is the country's sovereign right to levy taxes.