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Indian tax authorities pursuing a retrospective tax case against the erstwhile Cairn India (now Vedanta India Ltd) have taken steps to extract some ₹666 crore payable to Cairn Energy Plc as dividend.
The move comes after numerous failed efforts by Cairn to contest the Income Tax Department’s claims, in a case that relates to the merger of Cairn India with Vedanta India Ltd.
A senior Vedanta India official told BusinessLine : “The dividends due to Cairn Energy for the last three years were lying in an unpaid dividend account as they were subject to an attachment order by the Tax Department. But we got an order from the tax authorities to pay over any sums due or will become due to Cairn Energy Plc. Accordingly, we have advised the banks holding approximately ₹666 crore in the dividend account, to be transferred to the I-T authorities.”
On June 9, an Income-Tax Tribunal looking into the matter had issued an order lifting the earlier restrictions on dividend payout to Cairn Energy. However, on June 16 it issued an order to Vedanta India Ltd directing it to pay any sums that were due to Cairn Energy to the Indian government.
According to Cairn Energy, sums (dividend) due to it from Vedanta India now stood at $104 million, including historical dividends of $53 million and a further dividend of $51 million.
Cairn reactionReacting to the latest development, Cairn Energy informed the London Stock Exchange that notwithstanding the Indian authorities’ action, it would continue with the international arbitration proceedings under the UK-India Bilateral Investment Treaty.
Cairn is seeking full restitution for Treaty breaches resulting from the expropriation of its investments in India in 2014, the attempts to enforce retrospective tax measures, and the failure to treat the company and its investments fairly and equitably. The arbitration final hearings are scheduled for January 2018.
The case came up following a retrospective amendment to the Indian tax law introduced in 2012. Cairn UK Holdings Ltd, a subsidiary of Cairn Energy Plc, had received an assessment order from the Income-Tax Department relating to the intra-group restructuring undertaken in 2006 prior to the IPO of Cairn India Ltd in India.
The assessment was order for about $1.5 billion plus interest backdated to 2007 totalling about $2.8 billion. The assets of Cairn UK Holding comprise the Group’s 9.8 per cent holding in Cairn India Ltd, which stands converted to a shareholding in Vedanta India. Any recovery by the Indian authorities would be limited to such assets.
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