I-T dept to attach shares if Cairn doesn’t pay Rs10,395 crore tax
Income tax dept slaps a fresh notice on Cairn Energy seeking to take over the firm’s residual 9.8% stake in its erstwhile Indian subsidiary to recover Rs10,395 crore tax dues
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New Delhi: The income tax (I-T) department has slapped a fresh notice on UK’s Cairn Energy Plc seeking to take over the firm’s residual 9.8% stake in its erstwhile Indian subsidiary to recover Rs10,395 crore retrospective tax demand.
The tax department had, in an unprecedented move, in June appropriated Rs1,500 crore of tax refund due to Cairn Energy and another Rs666 crore of dividend income due to it for three years from its erstwhile subsidiary Cairn India (now Vedanta Ltd) to recover the Rs10,247 crore of tax plus interest.
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It again wrote to Cairn Energy on 26 June asking it to repay the balance tax due, failing which it will take over its 9.8% shareholding in Cairn India, a person familiar with the development said requesting anonymity as the information is not yet public.
In the notice, the I-T department gave the UK firm 15 days to repay or face attachment of shares.
The department moved to recover the tax after Cairn Energy lost an appeal against the retrospective tax demand in the Income Tax Appellate Tribunal (Itat).
The I-T department on 31 March issued a notice seeking Rs10,247 crore tax by 15 June. As the company failed to pay, it went ahead to take over the refund and dividend income.
The person said about Rs2,200 crore recovered so far does not even fully cover the interest due on principal tax demand of Rs10,247 crore which was levied over alleged capital gains the company had made in 2006 when it transferred Indian assets to a newly created firm (Cairn India) and listed in on stock exchanges.
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The outstanding tax demand is Rs10,395 crore, the person said, adding that interest at the rate of 1% will keep adding up every month on the tax demand.
“Cairn Energy has time till 11 July to reply to the notice sent by tax recovery officer under Income Tax Certificate Proceedings rules. If the company does not reply, then the department is likely to issue warrant which will be followed by a formal share attachment notice,” the person said.
The tax department, he said, may go a little slow on selling of the shares as it is waiting to see whether Cairn Energy approaches the Delhi high court challenging the Itat order which upheld the Rs10,247 crore tax demand on the British firm.
The company has time till mid-July to appeal against the order in high court.
The tax department has already filed a caveat in the Delhi high court asking that before any judgement is passed on the case, the tax department should be heard.
As many as 18.41 crore equity shares of Cairn India are under the attachment of the I-T department. Also, another 73.65 crore preferential shares are also attached.
These shares, when sold, could fetch the government around Rs5,990 crore at the current market price. The person said that on the date of attachment of shares on 16 June, Cairn India shares were valued at Rs241 apiece.
Cairn India shares closed at Rs285.40 on the BSE on Friday.
“The share price is rising and we have nothing to worry about. We will sell only at the best price and nothing less than Rs241 a share,” the person said.