10th Mar 2015 17:02
LONDON (Alliance News) - Cairn Energy PLC said Tuesday that it is disputing a draft assessment order from the Indian Income Tax Department calling for it to pay USD1.6 billion plus interest and any penalties for the fiscal year 2006/7 in an effort to "protect its legal position and shareholder interests."
The draft assessment comes from amendments introduced in the 2012 finance act that are looking to prior year tax transactions under retrospective legislation, Cairn said. The transactions being taxed are those it undertook to reorganise in order to list Cairn India Ltd in 2007.
Cairn retains roughly a 10% investment in Cairn India, which the company operated between 1996 and 2007 until it listed on the Bombay Stock Exchange.
Cairn said it strongly contests the basis of the draft assessment, and said it has been working with its advisers to confirm its has been fully compliment with tax legislation throughout its history of operating in India. It has filed a notice of dispute under the UK-India Investment Treaty.
Under the treaty, Cairn and the Indian government must now enter negotiations to seek a resolution to the tax dispute, and if a satisfactory resolution is not reached during the period of negotiations, an international arbitration panel will be constituted to adjudicate on the matter.
As a result of the dispute, Cairn is restricted from selling its 10% interest in Cairn India. It said it does not plan to make any provision for the draft tax assessment based on its legal advice, and will now look to recoup losses resulting from the "attachment of its Cairn India Stake since 2014."
"Cairn has consistently confirmed that it has been fully compliant with all relevant legislation and paid all applicable taxes in India and we are confident of our position under the UK-India Investment Treaty," said Chief Executive Simon Thomson in a statement.
"This issue is confined to our interests in India and the group remains well funded to deliver all of our objectives and commitments and we look forward to moving forward with our strategy whilst this issue is resolved under legal process," Thomson added.
Shares in Cairn closed down 7.3% at 183.69 pence Tuesday.
By Hana Stewart-Smith; [email protected]; @HanaSSAllNews
Copyright 2015 Alliance News Limited. All Rights Reserved.
Related Shares:
Capricorn Energy PLC