New Delhi, April 16 (PTI): Undeterred by the income tax department’s restrictions, Cairn Energy Plc has sought fresh approval from shareholders to sell its 9.65 per cent stake in Cairn India when such curbs are lifted.
In January, the income tax department had barred Cairn from selling the stake, alleging that the Scottish explorer did not pay tax on the capital gains of Rs 24,500 crore made when it transferred its India assets to a new company, Cairn India, in 2006-07.
After its annual general meeting on May 16, 2013, Cairn Energy had said in a regulatory filing that shareholders had authorised the board to dispose of all or part of the company’s residual interest in Cairn India.
“Cairn has now been restricted by the Indian income tax department from selling its shares in Cairn India,” the Scottish explorer said.
“However, Cairn believes it is appropriate to retain the flexibility to realise shareholder value from its residual interest in Cairn India in the event that the selling restriction is removed and is, therefore, seeking to renew the Residual Interest Disposal Authority,” it added.
Its AGM is scheduled to be held in Edinburgh on May 15.
Cairn sought shareholder approval to sell the residual stake through on-market transactions, including participation in any share buy-back by Cairn India.
At the current price, the residual stake of 9.65 per cent will fetch Cairn Energy over Rs 6,665.35 crore.
Cairn Energy previously operated the eastern offshore Ravva oil and gasfield and discovered significant natural gas reserves in a block in the Krishna-Godavari basin before striking oil in India’s largest onland field in Rajasthan in January 2004.
Two years later in 2006, it transferred its India business from subsidiaries incorporated in places such as Jersey, a tax haven, to the newly incorporated Cairn India.
After transferring the assets, the Scottish explorer listed Cairn India on the stock exchanges through an initial public offering in 2006 that raised Rs 8,616 crore.
In 2011, it sold a majority stake in Cairn India to mining group Vedanta for $8.67 billion.
The I-T department had, in a January 22 order, held that the Edinburgh-based Cairn made capital gains of Rs 24,503.50 crore in the 2006 transfer of assets to Cairn India. According to the department, it received Rs 26,681.87 crore for the asset transfer against its entire investment of Rs 2,178.36 crore in the India business.
“This (group) reorganisation (of 2006) was compliant with tax legislation in place at the time in each relevant jurisdiction, including India,” Cairn Energy said.