Business
After ex-parent, Cairn India handed $3.2 bn withholding tax demand
Mumbai, March 13
A day after mining group
Vedanta Resources-controlled Cairn India said it has not received any
notice about the retrospective $1.6 billion income tax demand on
Britain-based Cairn Energy, it has got a $3.26 billion withholding tax
demand for an eight-year-old transaction involving its former parent
company.
"We would like to inform you that Cairn India Limited
has received an order from the Income Tax Department today (Friday) for
an alleged failure to deduct withholding tax on alleged capital gains
arising during 2006-07 in the hands of Cairn UK Holdings Limited (CUHL),
our erstwhile parent company, a subsidiary of Cairn Energy Plc," Cairn
India said in a filing to the Bombay Stock Exchange.
"A demand of
INR 20,495 Crore (comprising tax of approximately Rs.10,248 crore and
interest of approximately Rs.10,247 crore) is alleged to be payable.
Cairn India Ltd does not agree with this alleged demand and will pursue
all possible options to protect its interest," the statement added.
"As
was communicated yesterday (Thursday), from the media reports we
understand that tax demand has also been made by the Income Tax
department on Cairn UK Holdings Limited (CUHL) on this matter," Cairn
India said.
Cairn India on Thursday clarified that CUHL was no longer part of its company.
Going
contrary to Jaitley's promise that India will not levy any tax with
retrospective effect, the Income Tax department on Wednesday imposed a
$1.6 billion (Rs.10,247 crore) tax demand on Cairn Energy UK.
The
demand relates to an alleged Rs.24,500 crore capital gains it made in
2006 when it transferred all its India assets to a new company, Cairn
India, which got listed on the stock exchanges.
British Foreign
Minister Philip Hammond, who is in India on an official visit, raised
the Cairn tax issue with union Finance Minister Arun Jaitley during
their meeting on Thursday.
The visiting minister told reporters
here that Jaitley told him that the tax case involving Cairn has to be
resolved through the courts as the process has already started.
"It
did come up during my meeting with Jaitley. He explained that this
particular tax demand is being sent out pursuant to a notice that was
issued by the previous government," Hammond said.
Invoking the
UK-India Investment Treaty, Cairn Energy said on Wednesday it will
contest the Indian tax demand under the terms of the pact signed by both
countries.
"Cairn continues to be restricted by the Indian
Income Tax department from selling its 10 percent shareholding in CIL,
currently valued at approximately $700 million. In addition, Cairn will
seek restitution of losses resulting from the attachment of its CIL
stake since 2014," it said.