NEW DELHI: Oil explorer Cairn Energy sued a dispute notice against Indian income tax department over $1.6 billion tax claim from the 2006-2007 fiscal years.
The dispute notice was filed under the terms of the UK-India Investment Treaty, meaning the Indian government and Cairn will now start negotiations to find a resolution to the dispute, Cairn said.
If no agreement is made, an international arbitration panel will rule on the matter, it added.
The tax investigation relates to transactions carried out to reorganize Cairn’s structure in a way to prepare for Cairn India Limited’s stock market flotation in 2007, Cairn said.
“Against a backdrop of regular engagement with the government of India since January 2014 it is very disappointing to have received a draft assessment order at this time,” said Chief Executive Simon Thomson in a statement.
The oil company added it did not intend to make any accounting provision relating to the draft tax assessment it has received.
“Cairn has consistently confirmed that it has been fully compliant with all relevant legislation and paid all applicable taxes in India,” Thomson added.
The ongoing tax payment investigation has meant that Cairn has been unable to proceed with a sale of its 10 percent stake in Cairn India Limited (CIL), valued at around $700 million.
“Cairn will seek restitution of losses resulting from the attachment of its CIL stake since 2014,” the company added.
