The Centre is likely to wait for the outcome of an arbitration initiated against it for levy of over Rs 10,000 crore retrospective tax on Cairn Energy before finalising its stand on a similar tax dispute case with Vodafone Group where a international arbitration court has ruled against it in favour of the telecom company.
The arbitration order on the tax dispute between the Indian government and Cairn Energy is expected over next few days.
Sources said that the order will have bearing on the course of action the government takes on its disputes over retrospective taxation with various entities in Vodafone Group.
If the arbitration order goes against the government in the Cairn Energy case, it will have to pay more than Rs 7,500 crore to the energy company as the amount that it has ceased by denying Cairn its shares of dividend and income tax department liquidating portion residual shares that the company had in Cairn India post its merger with Vedanta.
Sources said that the government wants to take a uniform stand challenging arbitration orders in both the cases so it would wait for the outcome in Cairn Rnergy tax dispute case.
Sources said if the arbitration order went in favour of Indian government in Cairn Energy case, there would be no financial liability on it as the actions have already been taken by it to recover tax dues. But in such a scenario, the government may decide, the source said, against appealing in the Vodafone case as taxes there are yet to be recovered by the government and an order against it means no financial liability.
However, challenge may be mounted if India loses arbitration even in Cairn Energy case.
As reported by IANS earlier, government is evaluating options on its loss in arbitration case against Vodafone Group over retrospective tax demand of more than Rs 20,000 crore.
The options include bringing a new law to withdraw the 2012 amendment to settle its tax dispute with Vodafone after the Permanent Court of Arbitration (PCA) at The Hague ruled in favour of the company.
The other options, sources said, is to look at challenging the PCA award in its entirety or confining the challenge to sovereign immunities as claimed by Vodafone Plc under the India-UK Bilateral Investment Protection Agreement (BIPA) and the Netherlands-India Bilateral Investment Treaty (BIT).
Sources said that the government is looking at all options, taking view on which move would be the best course that settles the dispute once and for all, along with limiting the loss to the exchequer, if it is to be incurred. One view is also that case should not be pursued and a out of the court settlement may be explored with telecom giant.