The tax department has slapped a fresh notice on UK's Cairn Energy Plc seeking to take over the firm's residual 9.8 per cent stake in its erstwhile Indian subsidiary to recover Rs 10,395 crore retrospective tax demand, according to a report on financial portal Moneycontrol.com.
Moneycontrol noted that the tax department, had in an unprecedented move last month seized Rs 1,500 crore by way of tax refund due to Cairn Energy and another Rs 666 crore of dividend income due to it for three years from its erstwhile subsidiary Cairn India (now Vedanta Ltd) to recover the Rs 10,247 crore of tax plus interest.
It has again written to Cairn Energy on June 26 asking it to repay the balance tax due, failing which it will take over its 9.8 per cent shareholding in Cairn India, a source told the financial portal, requesting not to be named as the information is not yet public.
The department moved to recover the tax after Cairn Energy lost an appeal against the retrospective tax demand in tax tribunal ITAT. On March 31, the I-T department had issued notice seeking Rs 10,247 crore tax by June 15. As the company failed to pay, it went ahead to take over the refund and dividend income, the report said.
The source told Moneycontrol that about Rs 2,200 crore has been recovered so far. But this does not even fully cover the interest due on principal tax demand of Rs 10,247 crore which was levied over alleged capital gains the company had made in 2006 when it transfered India assets to a newly created firm, Cairn India and listed in on stock exchanges.
The outstanding tax demand is Rs 10,395 crore, he said, adding an interest at the rate of 1 per cent will keep adding up every month on the tax demand.
"Cairn Energy has time till July 11 to reply to the notice sent by tax recovery officer under Income Tax Certificate Proceedings rules. If the company does not reply, then the department is likely to issue warrant which will be followed by a formal share attachment notice," the source told Moneycontrol.
The tax department, the source added, may go a little slow on selling of the shares as it is waiting to see whether Cairn Energy approaches the Delhi High Court challenging the ITAT order which upheld the Rs 10,247 crore tax demand on the British firm.
The company has time till mid-July to appeal against the order in high court. The tax department has already filed a caveat in the Delhi High Court asking that before any judgement is passed on the case, the tax department should be heard, the Moneycontrol report said.
As many as 18.41 crore equity shares of Cairn India are under the attachment of Income Tax department. Also, another 73.65 crore preferential shares are also attached.
These shares when sold could fetch the government around Rs 5,990 crore at the current market price.