LONDON: Contrary to Finance Minister Arun Jaitley’s promise that India will not levy any tax with retrospective effect, the Income Tax department imposed a Rs.10,247 crore ($1.6 billion) tax demand on British major Cairn Energy.
The tax demand, which the company said it would contest, relates to an alleged Rs.24,500 crore capital gains it made in 2006 when it transferred all its India assets to a new company, Cairn India, which got listed on the stock exchanges.
Cairn, in a statement, said it has received “a draft assessment order from the Indian Income Tax department”.
The draft order addressed to Cairn’s subsidiary, Cairn UK Holdings Limited, is in respect of fiscal year 2006-07 to the amount of USD 1.6 billion plus any applicable interest and penalties,” it said.
The company has instructed its counsel to file a Notice of Dispute under the UK-India Investment Treaty so as to protect its legal position and shareholder interests.
Cairn has consistently confirmed that it has been fully compliant with all relevant legislation and paid all applicable taxes in India and we are confident of our position under the UK-India Investment Treaty,” Cairn chief executive Simon Thomson said in a statement.
