The Income Tax department has sold about 40% of British oil firm Cairn Energy Plc’s shares in Vedanta to recover a part of the Rs. 10,247-crore demanded as retrospective tax.
Weeks before an international arbitration tribunal begins final hearing in Cairn’s challenge to the retrospective tax, the I-T department last month sold about 2% of the firm’s shares in Vedanta in at least five tranches totalling $216 million, and may sell remaining stake as well, the British firm said. The 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 an internal reorganisation of India business.
Residual stake
This was followed by attaching the firm’s residual 9.8% shares in its erstwhile subsidiary, Cairn India which was subsequently merged with its new parent Vedanta, in which Cairn Energy held about 4.95% stake.
These shares continued to be attached for four years but the tax department had earlier this year got them transferred to it. Cairn said the department had continued to enforce its retrospective tax claim against the company whilst the arbitration initiated under the U.K.-India Bilateral Investment Treaty was ongoing.
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