I-T dept restrains Cairn Energy from selling residual India stake
24 January 2014
The income tax department has restrained Cairn Energy Plc from transferring its 10.3-per cent residual holding in Cairn India as the tax authorities are probing the UK's company sale of its Indian assets to Vedanta Resources.
Cairn Energy was widely expected to participate in the Indian firm's share buyback, which opened Thursday.
The I-T Department had, on 15 January, started investigation into possible unpaid capital gains tax on Cairn Energy's transfer of its Indian assets to Vedanta Resources, another London-based company.
Cairn India shares were held in a subsidiary set up in the tax haven of Jersey before its transfer to newly incorporated Cairn India in 2006.
''Cairn (Energy) has been contacted by the Income Tax Department of India to discuss income tax assessments for the year ending 31 March 2007. Cairn is co-operating to provide the necessary documentation and information as requested,'' the Edinburgh-based company said in a statement.
''While discussions are ongoing, the Income Tax Department has instructed Cairn Energy Plc to hold its shares in Cairn India,'' Cairn said, adding, ''Cairn will update the market in due course.''
The I-T Department had 'surveyed' Cairn India's Gurgaon office on 15 January. It is investigating the asset transfer under Section 9 of the Income-Tax Act, which deals with income deemed to accrue or arise in India.
Cairn India sources confirmed a "visit" by IT officials for "just a survey" and said the requested information was provided to them.
"Cairn India is fully compliant with all Indian income tax laws and the income tax assessments, including transfer pricing assessment, has been completed for FY 2006-07," sources said.
The firm, which raised Rs8,616 crore in the IPO, sold its majority stake in Cairn India to Vedanta Group for $8.67 billion in 2011.
Cairn India, which is sitting on a cash pile of about $3 billion, plans to buy 170.9 million shares, or 8.9 per cent of the equity, from the open market at not more than Rs335 apiece, aggregating up to Rs5,725 crore.