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Cairn tax dispute: I-T dept confiscates dividend, refund

Press Trust of India  |  New Delhi 

The Department has ordered coercive action against Cairn Energy of UK, including taking away over Rs 2,000 crore dividend and refund, to recover part of the Rs 10,247 crore retrospective

This follows British firm losing in an international arbitration tribunal its challenge against India's I-T department taking coercive action to recover the dues.

A top source said the department has already adjusted Rs 1,500 crore of refund that was due to Cairn Energy Plc, against the principal amount.

On June 16, it sent a notice under section 226(3) of the Act to the company's erstwhile subsidiary, Ltd (now Vedanta Ltd), saying whatever is due to the British firm in the form of dividend should be transfered to the

As much as USD 104 million or about Rs 650 crore, in past and current dividend, is due to the company, the source said, adding that it was likely to be transfered to the exchequer today or by tomorrow.

Next, the department will move to take 9.8 per cent residual stake that Cairn Energy retains in even after selling the erstwhile subsidiary to Vedanta.

The source said the tribunal refused to entertain Cairn Energy's pleas for restraining the I-T department from taking any coercive action and ordering to release dividend due to it.

The Assessing Officer is in the process of drawing a certificate under the (Certificate Proceedings) Rules, 1962 for recovery of tax, as per which the recovery officer will go ahead to attach the shares and sell them.

However, the sale might not happen immediately as the department will wait for the best price, the source said, adding that the shares can be sold to LIC or Vedanta whosoever quotes the best price.

The I-T department had on March 31 issued a notice to Cairn Energy seeking Rs 10,247 crore and set June 15 as the deadline for payment. This notice followed Cairn Energy losing an appeal in the tribunal ITAT against the levy.

ITAT had in March upheld levy of retrospective on 2006 transfer of shares by the firm to a newly created Indian unit Cairn India, for a certain consideration.

Cairn Energy in an emailed statement confirmed the department's move.

"On June 16, 2017 the Indian Department (IITD) issued an order to Vedanta Ltd (VIL) directing it to pay over any sums due to Cairn. Sums due to Cairn from VIL now total USD 104 million, including historical dividends of USD 53 million and a further dividend of USD 51 million after the merger of CIL and VIL," it said.

The company said however that it will continue with the international arbitration proceedings against the retrospective demand.

"Cairn is seeking full restitution for (UK-Bilateral Investment Treaty) Treaty breaches resulting from the expropriation of its investments in in 2014, the attempts to enforce retrospective measures and the failure to treat the Company and its investments fairly and equitably," it said.

The company said it has a high level of confidence in its case under the Treaty and, in addition to resolution of the retrospective dispute, its claim seeks damages equal to the value of the Group's residual shareholding in at the time it was attached (approximately USD 1 billion).

The Netherlands-based 3-member tribunal was constituted to decide on Cairn's plea against slapping a Rs 10,247 crore retrospective demand and freezing its assets.

The Tribunal heard Cairn pleas on June 12.

Prior to that, it had on June 9 "issued a formal order memorialising the numerous confirmations from the of that the dividends were no longer restricted and authorising that order to be provided to Ltd (now named Vedanta Limited (VIL) following the merger of CIL and VIL)", the statement added.

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Mon, June 19 2017. 13:42 IST