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I-T dept sells Cairn Energy shares to recover retro tax

Press Trust of India  |  New Delhi 

The Income department has sold about 40 per cent of British firm plc's shares in to recover a part of Rs 10,247-crore demanded as retrospective

Weeks before an international arbitration tribunal begins final hearing in Cairn's challenge to the retrospective tax, ?the Indian I-T department last month sold about 2 per cent of the firm's shares in in at least five tranches totalling USD 216 million, and may sell remaining stake as well, the British firm said in a statement.

The department had in January 2014 used a two-year-old to raise a Rs 10,247-crore demand on alleged capital gains made by on a decade-old internal reorganisation of business.

This was followed by attaching the company's residual 9.8 per cent shares in its erstwhile subsidiary, was subsequently merged with its new parent Vedanta, in which held about 4.95 per cent stake.

These shares continued to be attached for four years but the tax department had earlier this year got them transferred to it.

Cairn said the tax department has continued to enforce its retrospective tax claim against the company whilst the arbitration initiated under the UK-India Bilateral Investment Treaty has been ongoing.

"To date, the tax department has seized dividends due to Cairn from its shareholding in totalling USD 155 million and it has offset a tax rebate of USD 234 million due to Cairn as a result of overpayment of capital gains tax on a separate matter," it said.

The share were sold for around Rs 230 a piece. Vedanta was trading at Rs 223.50 on the BSE at 1400 hours today.

The company, which gave India its biggest onland discovery, said it has now been notified that the tax department "has sold part of Cairn's shareholding in Vedanta, realising and seizing proceeds of USD 216 million."

Following this sale, Cairn's retained holding in Vedanta is now approximately 3 per cent. "It is possible that the income tax department may make further sales," it said.

The tax department had come close to selling the shares in March, but aborted the move at the last moment.

Cairn Energy has challenged the retrospective tax demand through an international arbitration, the final outcome of which is expected later this year.

"All of the written submissions by Cairn and the have now been made, and the final arbitration hearings are scheduled for two weeks commencing on August 20, 2018 in

"These hearings will involve testimony by expert and fact witnesses and will address Cairn's claims under the treaty, India's defences and issues of jurisdiction," it said.

Cairn said it is, through the arbitration, seeking reparation of the monetary value required to restore the firm to the position it would have enjoyed in 2014 but for the Government of India's actions are in breach of the treaty.

"Accordingly, the status of Cairn's assets seized in India does not affect the merits of Cairn's claims, the amount of relief sought, or the enforceability of the arbitral award," it said.

Cairn said it will write down the carrying value of its investment in Vedanta following the share sale.

"Following the hearing, the will issue a binding and internationally-enforceable award," it said.

"The drafting and issuance of such an award typically takes several months. In this case, taking into account the delays already suffered by Cairn, the tribunal has stated that it will endeavour to issue its award as expeditiously as possible."

Cairn said it is seeking "full restitution for losses totalling approximately USD 1.3 billion resulting from India's expropriation of its investments in India in 2014, and India's unfair and inequitable treatment of those investments, due to the imposition of retrospective tax measures."

The Central Board of (CBDT) had in April, in response to a PTI query, stated that "there is no legal advice against the sale of the attached shares".

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

First Published: Mon, July 09 2018. 14:50 IST