New Delhi, May 1 (PTI): British oil firm Cairn Energy has accused a senior finance ministry official of "privately" advising billionaire Anil Agarwal-led Vedanta Group to withhold its dividend income for a potential squaring off of a retrospective tax liability.

Cairn Energy, whose assets have been frozen for a retrospective tax demand, has in a written application to an international arbitration tribunal stated that the dividend income from its erstwhile subsidiary Cairn India (now a Vedanta Group firm) has not been paid for the last three financial years.

This, it alleged, was done at the behest of an "advice" a senior finance ministry official gave to Vedanta in "private meetings", multiple sources in the tax department and industry said.

It has also written to market regulator Sebi on the issue.

In a draft assessment in January 2014, the income tax department had estimated that Cairn Energy is liable to pay a tax of Rs 10,247 crore for capital gains it allegedly made on a 2006 transfer of India assets to a newly created subsidiary Cairn India and then listing it on stock exchanges.

Cairn Energy sold its majority stake in Cairn India to Vedanta Group in 2011 but retained a 9.8 per cent stake which the tax department had barred it from selling.

After sending a draft assessment order, the tax department had in April 2014 also raised a similar tax demand on Cairn India for not withholding tax in 2006.

Both Cairn Energy and Cairn India have initiated separate international arbitrations contesting the tax demands.

Though dividend income can be frozen only after a formal tax demand is raised, which happened only on March 31, 2017 after full assessment was completed and June 15, 2017 was given as the due date for payment, Cairn has not received Rs 670 crore of dividend income for the last three fiscals.

When contacted, the finance ministry said it does not comment on individual cases.

Sources, however, said the tax department will reply to the arbitration panel saying it does not interfere in matters between two companies.

A Cairn India spokesperson said: "The dividends due to Cairn Energy for the last three years are lying in an unpaid dividend account as they were subject to an attachment order under section 281B (of the income tax act)."

"We would like to reiterate that these dividends are not available for use by Cairn (now Vedanta)."

"Cairn Energy has also been in touch with us and we have been responding to their mails/letters sharing our predicament in view of the notice now issued to them post the order of the Income Tax Tribunal for payment of tax liability by June 15, 2017," he added.

When contacted, Cairn Energy spokesperson confirmed the company also wrote to "Sebi and Cairn India in relation to payment of Cairn India dividends."

"Both Sebi and Cairn India have confirmed receipt of the letter," the spokesperson said.

Originally, Cairn Energy approached the arbitration panel in February saying India is stopping Cairn India from paying dividend.

The tribunal asked the tax department if it had stopped Cairn India from paying dividend.

The tax department, in its reply, stated that the matter was between the two companies and it had no role to play, sources said.