Indo-Asian News Service, New Delhi, March 10: British oil giant Cairn Energy said Tuesday that it was in talks with the Indian government to resolve a tax dispute that had put on hold the sale of its 10 per cent stake in Cairn India Ltd.
“We note the comments made by the new BJP government about the impact of retrospective tax legislation and the negative signal it sends to the international investment community,” Cairn chairman Ian Tyler said in the company earnings statement for 2014. “Our approach to date has been to focus on engagement with the government of India and resolving this matter clearly continues to be a high priority,” he added.
The company faces a potential tax demand on an alleged Rs.24,500cr 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, however, has been barred from selling its residual stake in Cairn India.
Cairn Energy, which had in 2011 sold majority stake in its Indian arm to mining company Vedanta for $8.67 billion, still holds 9.8 per cent stake in Cairn India.
“In early 2014, Cairn received notice from the income tax department, citing 2012 retrospective legislation and requesting information relating to a group re-organisation in 2006,” Cairn chief executive Simon Thomson said. “At the same time, the income tax department restricted Cairn from accessing the value of its remaining 10 per cent shareholding in Cairn India Ltd. (CIL), then valued at around $1 billion,” he added.
Retrospective taxation has evoked much criticism from domestic and overseas investors, notably Britain-based telecom major Vodafone.
Vodafone was slapped with a Rs.20,000cr retrospective capital gains tax after it acquired the telecom assets of Indian conglomerate Essar Group via Vodafone Mauritius.