Cairn Energy on Tuesday informed its shareholders that its subsidiary Cairn UK Holdings had received tax assessment order by the Income Tax Department of India for Rs.10,247 crore in tax and Rs.18,800 crore in back interest.
However, the UK-based company and erstwhile owner of Cairn India, assured its shareholders that any recovery of tax dues by Indian authorities would be limited to the assets of Cairn UK Holdings. “The total assets of the Cairn subsidiary against which the tax authorities are seeking to pursue a tax claim are $477 million (including principally the group’s near 10 per cent shareholding in Cairn India Ltd) and any recovery by the Indian authorities would be limited to such assets,” according to Cairn Energy’s preliminary earnings announcement for 2015.
“The assessment order is in the amount of Rs.10,247 crore (approximately $1.6 billion) plus interest back dated to 2007 totalling Rs.18,800 crore (approximately $2.8 billion),” the company added. The Income Tax Department had served Cairn UK Holdings, a direct subsidiary of Cairn Energy PLC, with an income tax assessment order relating to an intra-group restructuring that took place in 2006.
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Finance Minister Arun Jaitley had in his Budget speech proposed a one-time dispute resolution scheme for such retrospective tax cases wherein the companies would be given the opportunity to settle the case by paying only the tax arrears, waiving the interest and penalty.
The tax department had served a similar tax notice to Vodafone for Rs .14,200 crore of tax dues.