INSUBCONTINENT EXCLUSIVE:
New Delhi: The Income Tax Department has sold more of Cairn Energy Plc's shares in mining major Vedanta to recover a part of the Rs 10,247
crore retrospective tax demand, the British firm said Tuesday.
The Income Tax Department, which had in May and June sold a little under 2
per cent Cairn's holding in Vedanta for about USD 231 million, sold a further one per cent last month when an international arbitration
tribunal was holding the final hearing in The Hague against the imposition of a retrospective tax.
Cairn in its half-yearly report
announcement Tuesday reported a loss of USD 500.5 million as a result of the de-recognition and loss of financial assets in India.
"At
January 1, 2018, Cairn held 4.9 per cent of the listed equity shares in Vedanta Ltd (VL)
During late May and early June 2018 the Indian Income Tax Department (IITD) instructed the sale of 1.7 per cent of Cairn's shareholding,
seizing the resultant proceeds
This has resulted in a loss on de-recognition of USD 230.8 million during the six month period to June 30, 2018.
"Further sales of 1.1 per
cent were instructed in August and September 2018, reducing Cairn's shareholding in the listed equity shares to 2.1 per cent," Cairn Energy
said in the statement.
It said the IITD had continued to enforce its retrospective tax claim against Cairn whilst the arbitration, initiated
under the UK-India Bilateral Investment Treaty, has been ongoing.
"To date, the IITD has seized dividends due to Cairn from its shareholding
in VL totalling approximately USD 162 million and it has offset a tax rebate of USD 234 million due to Cairn as a result of overpayment of
capital gains tax on a separate matter," it said.
During January-June, "the IITD seized proceeds from about 2 per cent sale of Cairn's
shareholding in VL, realising USD 231 million
Subsequent to H1, a further approximately 1 per cent shares were sold," it said.
The Income Tax Department began selling shares on May 14 --
the day Arun Jaitley underwent a kidney transplant surgery and the charge of his finance portfolio was given to Piyush Goyal on a temporary
Jaitley resumed charge on August 23.
The international arbitration tribunal, which began final hearing in Cairn's challenge to retrospective
tax demand on August 20, has concluded it and "stated that it will make appropriate arrangements to progress with the drafting of the award
as expeditiously as possible," the statement said.
"Based on detailed legal advice, Cairn is confident that it will be successful in this
arbitration," it said.
"The group also has legal advice confirming that the maximum amount that could ultimately be recovered from Cairn by
the IITD is limited to the value of the assets of Cairn UK Holdings Limited (CUHL), a direct subsidiary of Cairn Energy PLC and the assessee
in respect of tax demanded
CUHL's assets are principally the remaining ordinary and preference shares in VL," it added.
Cairn said it continues to be restricted from
selling its remaining shares in VL, pending conclusion of the ongoing arbitration proceedings.
The firm, which gave the country's its
biggest onland oil discovery in Rajasthan, is seeking restoration of monetary value it enjoyed in 2014 before the government levied
retrospective tax demand and attached its shares.
"The arbitral tribunal is expected to issue a binding and internationally-enforceable
award, the drafting and issuance of such an award typically takes several months
In this case, taking into account the delays already suffered by Cairn, the tribunal has stated that it will endeavour to issue its award as
expeditiously as possible," the statement said.
Cairn said it continues to have a high level of confidence in the merits of its claims in
"Cairn is seeking full restitution for losses totalling more than USD 1.4 billion resulting from India's expropriation of its investments in
India in 2014, and India's unfair and inequitable treatment of those investments, due to the imposition of retrospective tax measures."
The
tax department had in January 2014 used a two-year-old retrospective tax law to raise a Rs 10,247-crore demand on alleged capital gains made
by Cairn Energy on a decade-old internal reorganisation of its India business.
This was followed by attaching the company's residual 9.8 per
cent shares in its erstwhile subsidiary, Cairn India
Cairn India was subsequently merged with its new parent Vedanta, in which Cairn Energy held about 4.95 per cent stake.
These shares
continued to be attached for four years but the tax department had earlier this year got them transferred to it.