Tax dept slaps fresh notice on Cairn

Tax dept slaps fresh notice on Cairn

The tax department has slapped a fresh notice on UK’s Cairn Energy, seeking to take over the firm’s residual 9.8% stake in its erstwhile Indian subsidiary to recover Rs 10,395 crore retrospective tax demand.

In an unprecedented move last month, the tax department had appropriated Rs 1,500 crore of tax refund due to Cairn Energy, and another Rs 666 crore of dividend income due to it for three years from its erstwhile subsidiary Cairn India (now Vedanta) to recover the Rs 10,247 crore of tax-plus-interest. It has again written to Cairn Energy on June 26, asking it to repay the balance tax due, failing which, it will take over its 9.8% shareholding in Cairn India, a source said.

In the notice, the Income Tax Department gave the 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 tax tribunal ITAT. On March 31, it issued a notice seeking Rs 10,247 crore tax by June 15. As the company failed to pay, it went ahead to take over the refund and dividend income.

The source said that about Rs 2,200 crore recovered so far does not even fully cover the interest due on principal tax demand of Rs 10,247 crore, which was levied over alleged capital gains the company had made in 2006, when it transfered India assets to a newly created firm, Cairn India and listed in on stock exchanges.

The outstanding tax demand is Rs 10,395 crore. An interest at the rate of 1% will keep adding up every month on the tax demand.

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