13th Mar 2015 08:16
LONDON (Alliance News) - Vedanta Resources PLC Friday joined Cairn Energy PLC in announcing Cairn India Ltd is facing a substantial tax order from the Indian Income Tax Department in relation to the fiscal year 2006 to 2007.
On Tuesday, Cairn Energy PLC, which holds a 10% stake in Cairn India Ltd, said 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 to 2007 in an effort to "protect its legal position and shareholder interests".
Vedanta, which holds a far more significant 59.8% stake in Cairn India, said the subsidiary released a statement on Thursday, which confirmed the order from the Income Tax Department for an alleged failure to deduct withholding tax on alleged capital gains arising during 2006 to 2007 "in the hands of Cairn UK Holdings Limited, our erstwhile parent company, a subsidiary of Cairn Energy PLC," it said.
In the statement from Cairn India, the company said the alleged failure was in relation to Cairn UK Holdings transferring its shares to Cairn India as part of internal group reorganisation in 2006 to 2007 to facilitate the initial public offering of Cairn India on the Bombay Stock Exchange.
Vedanta and Cairn India said the total demand is for around INR20,495 crore, which is INR204.95 billion, comprising of INR102.48 billion of tax and INR102.47 of interest.
That INR204.95 billion converts roughly to USD3.27 billion.
Cairn India followed Cairn Energy in defending its position, saying: "Cairn India has always been fully compliant with all Indian Income tax laws. Income tax assessments including transfer pricing assessment were duly completed for financial year 2006 to 2007," it said.
Vedanta did not state what it will do regarding the order, or how it will directly affect the company.
On Tuesday, Cairn Energy said it had filed a notice of dispute under the UK-India Investment Treaty and said it "strongly contests the basis of the draft assessment".
Vedanta shares fell 1.3% to 520.50 pence per share at the open Friday morning, whilst Cairn Energy shares were down 2.0% to 158.00 pence per share.
By Joshua Warner; [email protected]; @JoshAlliance
Copyright 2015 Alliance News Limited. All Rights Reserved.
Related Shares:
Vedanta ResourcesCapricorn Energy PLC