Mumbai/New Delhi, March 12 (IANS): Cairn India Ltd said on Thursday that it has not received any notice regarding the retrospective $1.6 billion income tax demand on British major Cairn Energy, while noting that Cairn UK Holdings is presently not part of it.
British Foreign Minister Philip Hammond, who is in India on an official visit, meanwhile, raised the Cairn tax issue with Finance Minister Arun Jaitley during their meeting on Thursday.
"From media reports we understand that the aforesaid tax demand has been made by the Income Tax Department on Cairn UK Holdings Limited (CUHL). We would like to clarify that CUHL is incorporated in UK and is presently not part of Cairn India Limited. As no demand has yet been received by Cairn India Limited," Cairn India said in a filing to the BSE.
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 British major Cairn.
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.
The British 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 said on Wednesday it will contest this under the terms of the pact signed by both countries.
"Correspondence received from the Income Tax department indicates that the assessment stems from amendments introduced in the 2012 Finance Act which seek to tax prior year transactions under retrospective legislation," Cairn said in a statement.
"Cairn strongly contests the basis of the draft assessment and the Notice of Dispute is supported by detailed legal advice on the strength of the legal protections available to it under international law," the statement added.
"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.