Weeks before an international arbitration tribunal rules on retrospective tax levied by India, the income tax (I-T) department has sold almost all of Cairn Energy’s attached shares to recover a part of the Rs 102.47 billion retrospective tax demand, regulatory filings showed.
While India had used a 2012 legislation to tax certain past income of at least half a dozen foreign companies such as Vodafone, Cairn Energy of the UK remains the only company against whom the demand has been enforced and it remains to be seen if an arbitration award against it will be honoured.
Cairn Energy held a 4.95 per cent stake in mining major Vedanta, which the I-T department had attached after issuing a Rs 102.47 billion tax demand in 2014 on alleged capital gains the British firm made on a decade-old reorganisation of its India business. The department in May and June sold about 2 per cent stake held by Cairn in Vedanta.
Vedanta, in its March quarter filing of shareholding pattern to stock exchanges, showed 184 million (4.95 per cent) shares being held by Tax Recovery Officer (International taxation)-I. This, in the June quarter filing, dropped to 119.6 million shares (3.22 per cent). In its filing for the September quarter, Vedanta did not list the I-T department as holding any shares (greater than 1 per cent).
The shareholding pattern at the end of September did not list I-T department as holder of shares in that section, implying that either all of the shares have been sold or that such shareholding has fallen below 1 per cent.
A Cairn Energy spokesperson said: “The international arbitration case under the India UK Bilateral Investment Treaty is in its final stages."