I-T dept scanner on Cairn for asset transfer

The income tax (I-T) department has conducted a survey on the Gurgaon office of Cairn India, the largest oil producer, to assess the tax liability due to transfer of assets by its erstwhile UK promoter, Cairn Energy Plc, to the Indian entity.

The purpose of the survey was to find out if any capital gains tax due on account of the transaction in 2006 when Cairn Energy had transferred shares, held by a subsidiary incorporated in Jersey, a tax haven, to newly incorporated Cairn India.

The I-T department is investigating the asset transfer under section 9 of the Income-Tax Act, which deals with income deemed to accrue or arise in India. If any tax demand is raised, it would be on Cairn Energy Plc of the UK.

Cairn Energy Plc had transferred the India assets into the newly incorporated Cairn India Ltd and listed the firm on stock exchanges through an initial public offering.

The Edinburgh-based firm, which raised Rs 8,616 crore in the IPO in 2011, sold its majority stake in Cairn India to Vedanta Group for $8.67 billion.

Confirming I-T officials had visited the office to conduct "just a survey", a Cairn India spokesperson said requested information was provided to them. "Cairn India is fully compliant with all Indian income tax laws; and income tax assessments, including transfer pricing assessment, had been completed for the financial year 2006-07," he said.

The spokesperson said Cairn was one of the highest contributors to the exchequer by way of taxes and royalties.