New Delhi, Jul 10: The income tax (I-T) department has sold about 40 per cent of British oil firm Cairn Energy’s shares in Vedanta to recover a part of the Rs 10,247-crore demanded as retrospective tax.
Weeks before an international arbitration tribunal begins final hearing in Cairn’s challenge to the retrospective tax, the I-T department last month sold about 2 per cent of the firm’s stake in Vedanta in at least five tranches totalling $216 million, and may sell remaining stake as well, the British firm said in a statement.
The tax department had in January 2014 used a two-year-old retrospective tax law to raise a Rs 10,247-crore demand on alleged capital gains made by Cairn Energy on a decade-old internal reorganisation of India business. This was followed by attaching the company’s residual 9.8 per cent shares in its erstwhile subsidiary, Cairn India.
The subsidiary was subsequently merged with its new parent Vedanta, in which Cairn Energy held about 4.95 per cent stake. These shares continued to be attached for four years but the tax department had earlier this year got them transferred to it.
Cairn said the tax department has continued to enforce its retrospective tax claim against the company whilst the arbitration initiated under the UK-India Bilateral Investment Treaty has been ongoing.
“To date, the tax department has seized dividends due to Cairn from its shareholding in Vedanta totalling $155 million and it has offset a tax rebate of $234 million due to Cairn as a result of overpayment of capital gains tax on a separate matter,” it said.