UPDATE 1-Indian proposal aims to settle tax disputes with global firms

(Adds govt official, analyst comment)

By Aftab Ahmed and Manoj Kumar

NEW DELHI, Aug 5 (Reuters) - The Indian government on
Thursday proposed refunding companies involved in disputes over
past tax payments, aiming to settle long-running litigation over
sums totaling billions of dollars with companies including
Vodafone and Cairn Energy.

The amendment to the tax law, applicable after approval from
both houses of parliament and president, could help settle at
least 17 disputes over tax payments amounting to 500 billion
rupees ($6.7 billion) or more, analysts said.

Taxes on the indirect transfer of Indian assets before May
2012 would be "nullified on fulfillment of specified
conditions", such as the withdrawal of litigation and an
undertaking that no damages claims would be filed, a government
statement said.

"This decision helps to clarify our position with the
investors," Tarun Bajaj, revenue secretary at the finance
ministry told ET Now TV channel, adding it would help solve
pending cases with Cairn Energy and Vodafone if they withdraw
litigation and meet certain conditions.

The government has proposed repaying only the principle
amount and not interest, he said.

An international arbitration tribunal in The Hague last
year ruled that India’s imposition of a tax liability on
Vodafone, as well as interest and penalties, breached an
investment treaty between India and the Netherlands.

Cairn, which has oil and gas operations in India, was
awarded damages of more than $1.2 billion, plus interest and
costs, in December by the Permanent Court of Arbitration at The
Hague after a lengthy tussle with the Indian government over
certain retrospective tax claims.

"This is a big development and will surely put a lot of
uncertainty to rest," said Amit Maheshwari, tax partner at AKM
Global, a tax and consulting firm.

The government's proposed amendment in the law comes after a
French tribunal last month ordered a freeze on some 20 centrally
located properties belonging to the Indian government as part of
a guarantee of the amount owed to Cairn.

The government has for years defended controversial
retrospective amendments in the tax law introduced in 2012 by
the previous government designed to claim tax from international
companies which acquired assets of Indian companies.
(Reporting by Manoj Kumar and Aftab Ahmed
Editing by David Goodman and David Holmes)