Govt to defend tax demand of Rs 2,400 cr from Mitsui arm

The government will defend its stand of seeking tax payment of Rs 2,400 crore from Mitsui & Co subsidiary Earlyguard Ltd, which has initiated arbitration under the UK-India Bilateral Investment Treaty, said a senior official familiar with the development. “The government is bound to protect its interest, if tax is due then it will be sought,” the official said, asking not to be named.

Tax authorities have maintained that Earlyguard did not pay up the requisite tax on capital gains while selling shares of Finsider International, which owned 51% of Indian iron ore company Sesa Goa through an indirect transaction in April 2007. Japan’s Mitsui & Co said in its financial results earlier this month that its UK subsidiary Earlyguard Limited received a tax payment notice dated January 21, 2020 from the Indian tax authority. It added that while the subsidiary treated capital gain properly according to the tax laws at that time, the tax payment notice was issued, and on February 17, 2021, the company commenced arbitration under the UK-India Bilateral Investment Treaty in order to dispute this tax payment notice.

The change in tax laws came in 2012 when the government retrospectively amended the Income Tax Act allowing levy of capital gains tax on transactions done offshore involving Indian assets. The official quoted earlier added that the government’s stand will be consistent with that taken in other arbitration cases of Cairn Energy and Vodafone Group.