New Delhi, July 14 (IANS): British oil firm Cairn Energy Plc, battling payment of dues in the retrospective taxation case with the Indian government, has in turn slapped a notice demanding a compensation of $5.6 billion for not giving it a "fair and equitable treatment".

Cairn Energy filed the compensation notice with the international arbitration panel, saying the Indian government failed to give a fair and equitable treatment to investments in the country.

The company said it suffered a loss in the valuation of its 9.8 per cent holding of Cairn India owing to the retrospective taxation case that the income tax department initiated against it in 2014.

The compensation notice comes against the backdrop of the retrospective tax demand of Rs 29,000 crore from the Indian tax department that Cairn has received, on alleged capital gains the company made in a 2006 reorganisation of its India business.

"The aggregate amount of Rs 29,000 crore excludes any applicable penalty, which may also be applied to the final assessment (potentially up to 100 per cent of the final assessment order, excluding interest)," Cairn said, adding the amount comprises final assessment of Rs 10,200 crore plus interest back-dated to 2007 of up to Rs 18,800 crore.

Cairn said it was pursuing appeal against the order under the Indian law on the retrospective tax and penalty, besides protecting its assets from any legal action.

Vedanta took majority control of Cairn India for $8.67 billion in 2011 and holds 59.9 per cent in it through various units. Merging Cairn India with itself would provide Vedanta access to the oil explorer's cash and help reduce its debt burden. 

The Indian government, however, has said that it will not allow the Cairn India-Vedanta Ltd. merger unless Cairn's over Rs 10,200 crore retrospective tax issue is settled.