New Delhi: Slapped with Rs 10,247 crore tax assessment using retrospective tax legislation, British oil firm Cairn Energy plc has asked Finance Minister Arun Jaitley to do away with the legislation in the Budget next month to restore faith of international investors in India.
Cairn Energy chief executive Simon Thomson met Jaitley on Tuesday to seek a quick resolution to the two year old tax dispute that has forced the firm to sell assets, postpone investment and cut workforce. The company had challenged the tax assessment on a 2006 internal reorganisation and taken government to arbitration.
"We are moving ahead with the international arbitration and have a high level of confidence in our case," he said. He wanted the government to look at achieving "earlier resolution, either through independent review of our case or with legislative clarification in the forthcoming budget for benefit of all parties and letting the international investment community see that India is looking to handle retrospective taxation cases as quickly as possible".
Simon, who had previously written to Prime Minister Narendra Modi on the issue, did not disclose the response of Jaitley to his suggestion. In January 2014, Cairn was slapped with a Rs 10,247 crore assessment notice on alleged capital gains made on a 2006 internal reorganisation. However, no tax demand has been raised so far. The company denied any tax was due even if the retrospective amendments to Income Tax Act are applied as the group reorganisation had not resulted in any real income accruing to it.
The Income Tax Department says Cairn Energy allegedly made a capital gain of Rs 24,503.50 crore in 2006 while transferring all its India assets to a new company, Cairn India, and getting it listed on the stock exchanges.
Cairn Energy, which had in 2011 sold majority stake in its Indian unit to mining group Vedanta for USD 8.67 billion, still holds 9.8 per cent stake in Cairn India. But it has been barred by the I-T Department from selling this stake.
The value of the stake in Cairn India has since dropped to one-third.