Cairn India gets Rs20,495 crore demand notice from I-T dept

Moneylife Digital Team 13 March 2015

Cairn India, the unit of Vedanta, said it received a demand notice of Rs20,495 crore from income tax department for alleged failing to deduct withholding tax on alleged capital gains arising during 2006-07 in the hands of its parent Cairn UK Holdings

The Income Tax (I-T) department has issued a Rs20,495 crore tax demand on Cairn India Ltd for failing to deduct withholding tax on alleged capital gains made by Cairn Energy Plc, which holds around 10% stake in the company.

In a regulatory filing, the company, the unit of Vedanta Resources Plc said, "We would like to inform you that Cairn India has received an order from the Income Tax Department on Friday, for an alleged failure to deduct withholding tax on alleged capital gains arising during 2006-07 in the hands of Cairn UK Holdings Ltd (CUHL), our erstwhile parent company, a subsidiary of Cairn Energy Plc."

The Rs20,495 crore demand notice from I-T department includes a tax of about Rs10,248 crore and interest of around Rs10,247 crore.

"Income tax assessments including transfer pricing assessment were duly completed for FY 2006-07, earlier. As was communicated Thursday, from the media reports we understand that tax demand has also been made by the Income Tax Department on CUHL on this matter," Cairn India said in the filing.

In a statement, Cairn Energy said it has received "a draft assessment order from the Indian Income Tax Department."

Cairn Energy, which had in 2011 sold majority stake in its Indian unit to mining group Vedanta for $8.67 billion, still holds 9.8% stake in Cairn India.

It has filed a dispute against the I-T Department "under the terms of the UK-India Investment Treaty, meaning the government and Cairn will now start negotiations to find a resolution to the dispute," a report from Reuters said.

At 11.04am, Cairn India was trading marginally down at Rs232 on the BSE, while the 30-share Senses was 140 points down at 28,790.

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