Tax dept extends Cairn Energy share attachment till March 31

The Income Tax Department has extended till March 31 the bar on UK's Cairn Energy plc selling its residual stake in erstwhile subsidiary Cairn India as the Rs 10,247 crore tax dispute lingers on.
The I-T Department had on January 22, 2014 issued a notice of Cairn Energy over alleged Rs 10,247 crore capital gains it made in 2006 when it reorganised its India business and raised money through an initial public offer (IPO). Pending that it barred the company from selling 9.8 per cent stake in Cairn India.
"It is to inform you that provisional attachment of assets vide order u/s 281B of the Income Tax Act 1961 dated January 22, 2014 stands extended up to March 31, 2016," the I-T Department wrote to the company on January 14.

In 2014, Cairn Energy was widely seen as a likely participant in its erstwhile subsidiary, Cairn India's share buyback which had opened just a day before the order was issued.
The I-T Department had started an investigation on January 15, 2014 to establish if capital gains tax was due from Cairn Energy's transfer of shares of Indian assets that were held in a subsidiary set up in the tax haven of Jersey, to newly incorporated Cairn India in 2006.
It listed Cairn India Ltd on the stock exchanges through an initial public offering (IPO) in 2006. Through the IPO it raised Rs 8,616 crore and then in 2011 went on to sell majority stake in Cairn India to mining group Vedanta Group for USD 8.67 billion.

The I-T department says Cairn Energy allegedly made a capital gain of Rs 24,503.50 crore in 2006. It has however not raised a tax demand on the company so far.

Cairn Energy, which retained 9.8 per cent stake in Cairn India, contested that notice and has initiated arbitration against the government.
Cairn India, which was in January 2014 sitting on a cash pile of about USD 3 billion, had in the share buyback planned to buy 17.09 crore shares, or 8.9 per cent of the equity, from the open market at not more than Rs 335 apiece, aggregating up to Rs 5,725 crore.

With Cairn Energy not participating, the share buyback fell.