Working with India to resolve tax row, claims Scottish firm Cairn
August, 21st 2014
Scottish explorer Cairn Energy plc on Tuesday said it is working with the newly elected government to resolve a tax dispute that has stalled sale of its 10 per cent stake in Cairn India Ltd.
‘Cairn continues to seek resolution of the tax issue in India and will take all necessary steps to protect shareholders' interests,’ its Chief Executive Simon Thomson said.
The company faces a potential tax demand on an alleged Rs 24,500 crore of capital gains it made when in 2006 it transferred all its India assets to a new company, Cairn India and got it listed on stock exchanges.
However, no tax demand has been raised so far.
Cairn Energy, which had in 2011 sold majority stake in its Indian unit to mining group Vedanta for $8.67 billion, still holds 9.8 per cent stake in Cairn India. ‘There were some provisions in that budget in respect to dealing with the retrospective tax issue,’ he said. ‘We are waiting for clarification on those provisions.’
In his maiden budget, Finance Minister Arun Jaitley said no new tax demand will be raised using the controversial retrospective tax law introduced in 2008.
Cairn is in dialogue with the tax authorities since January when it was barred from selling its 9.8 per cent stake in Cairn India Ltd.
‘Cairn continues to be restricted from accessing the value of its about 10 per cent residual shareholding in CIL valued at $1.1 billion whilst interaction with the Indian tax authorities continues,’ it said in a statement.
The group has not received a tax assessment or demand from the Income Tax Department. ‘Cairn has re-confirmed with its advisers that throughout its history of operating in India the company has been fully compliant with and paid applicable taxes under the legislation in force at the time,’ it said.