Corporate Tax Evasion: Cairn Energy vs. India

Recently, Cairn Energy announced that it would move $1.2 billion of an international arbitration award to a Dutch bank, supposedly out of the reach of Indian authorities. This is a clear case of Section 195 of the Income-tax Act, 1961 – Tax on income not chargeable to tax in India.

Here, Cairn Energy, being a UK-based company, was involved in a tax dispute with India. The tribunal ruled in its favour, awarding a massive sum. However, to dodge Indian tax laws, Cairn Energy shifted the funds outside India to a Dutch bank. India, under Section 195, can still impose taxes on such income if it is 'received in India' through Indian banks or other means. Cairn Energy's move shows just how tricky corporate tax evasion can be.