New Delhi, Sep 11 (PTI) The Income Tax Department has sold more of Cairn Energy Plc's shares in mining major Vedanta Ltd 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 basis. 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 the arbitration. "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. PTI ANZ ANS
Disclaimer :- This story has not been edited by Outlook staff and is auto-generated from news agency feeds. Source: PTI