I-T dept orders recovery of Rs10K crore from Cairn
By Express News Service | Published: 20th June 2017 01:25 AM |
NEW DELHI: The Income Tax department has ordered action against Cairn Energy to recover Rs 10,247 crore of retrospective taxes after the company lost a challenge before an international arbitration panel. As part of the action, the I-T dept has directed the company to pay up to Rs 2,000 crore in dividends and tax refunds.
The Income Tax department holds Cairn Energy liable to pay taxes to the tune of Rs 10,247 crore on alleged capital gain the British firm made when it transferred its India assets to a newly created company — Cairn India in 2006. According to the firm, Cairn India (now called Vedanta Ltd) owes $104 million (Rs 650 crore), including historical dividends of $53 million and a further dividend of $51 million after the merger of Cairn India and Vedanta. Sources in Vedanta explained that an arrangement exists between CIL and VIL to park the dividend amount in a separate account. This was done, so that the dividend is not lost till the legal issues between the two firms are resolved.
According to an official, the department has already adjusted Rs 1,500 crore of tax refund that was due to Cairn Energy Plc, against the principal amount. On June 16, it sent a notice to the company’s erstwhile subsidiary, Cairn India Ltd, saying whatever is due to the British firm in the form of dividend should be transfered to the government.
The tax department will now move to take over the 9.8 per cent shareholding Cairn Energy had in Cairn India, the source said adding that the shares can be sold to LIC or Vedanta whosoever quotes the best price.
The company said it will however continue with the international arbitration proceedings against the retrospective tax demand.”Cairn is seeking full restitution for (UK-India Bilateral Investment Treaty) Treaty breaches resulting from the expropriation of its investments in India in 2014, the attempts to enforce retrospective tax measures and the failure to treat the Company and its investments fairly and equitably,” it said.
The company said it is confident in its case under the Treaty and, in addition to resolution of the retrospective tax dispute, its claim seeks damages equal to the value of the Group’s residual shareholding in Cairn India at the time it was attached, which amounts close to $1 billion.
A taxing issue
2006: Transfer of shares by the UK firm to a newly created Indian unit Cairn India, for a certain consideration
2014: Retrospective tax imposed on Cairn India
2014-2015: Cairn Energy approaches Income Tax Appellate Tribunal (ITAT)
2016-17: Cairn Energy loses an appeal in the tax tribunal ITAT against retrospective tax.
2017: I-T dept issues notice to Cairn Energy for H10,247 cr tax
June 15: Deadline for payment
June 16, 2017: Cairn India gets notice under section 226(3) of the income Tax Act to transfer dividend to the government
January 2018: Final hearings for the tribunal scheduled