Sticking to stand
New Delhi, Jan. 31: Scottish oil explorer Cairn Energy today said it was fully compliant with Indian tax laws during the period a tax claim was made on the company for transferring its Indian assets to a new entity.
“Cairn has reconfirmed with its advisers that throughout its history of operating in India, the company has been fully compliant with the tax legislation in force in each year,” the company said in a statement.
The company said the correspondence from the income tax department indicated that the claim was in respect to the amendments in the Finance Act of 2012 that sought to tax transactions of the previous years under retrospective legislation.
“Cairn intends to take whatever steps are necessary to protect the company’s interests and defend its position,” the UK-based company said.
In January 22, the income tax department held that the Edinburgh-based company made capital gains of Rs 24,503.50 crore when it transferred its entire Indian business from subsidiaries incorporated in Jersey, a tax haven, to the newly incorporated Cairn India in 2006.
Cairn, according to the tax department, received Rs 26,681.87 crore for the asset transfer against its entire investment of Rs 2,178.36 crore (£251.22 million) in the India business.
The authorities had not demanded any tax yet but has ordered Cairn India not to allow the transfer of the UK firm’s residual stake into the company during the ongoing buyback. It also ordered that the shares could not be pledged or mortgaged.
After transferring the assets, the Scottish explorer listed Cairn India on the stock exchanges through an initial public offering (IPO) in 2006 that raised Rs 8,616 crore.
In 2011, Cairn Energy sold its majority stake in Cairn India to mining group Vedanta for $8.67 billion. It still holds a 10.3 per cent stake in Cairn India.
Cairn Energy is the latest in a string of international companies such as Nokia and Shell to be probed for evading taxes. Such cases lead to protracted legal disputes — notably Vodafone, which remains mired in a $2.6-billion dispute over alleged unpaid capital gains tax relating to the acquisition of its Indian arm in 2007.