India's Income Tax department has cleared most of the 180 million shares of Cairns PLC in Vedanta worth around £550 million, with only 25,00,000 shares remaining to be disposed of against the department's demand of over £1 billion in capital gains tax from the UK oil major. The IT had passed an assessment order on January 25, 2016, raising tax demand of £1.03 million against Cairn PLC for capital gains as it had sold Indian assets to Vedanta. When it refused to pay the tax, the department on June 16, 2017, attached Cairns PLC's 4.9 per cent shares in Vedanta, which were 180 million shares.
The IT department has also appropriated dividends paid by Vedants to Cairn in two tranches for £105 million. These dividends were paid twice- first in September 2017 for £66 million and again in March 2018 for £39 million. In a statement, Cairn PLC said, “The international arbitration case under the India UK bilateral Investment Treaty is in its final stages. In March 2015, Cairn filed a notice of dispute under the Treaty in order to protect its legal position and seek restitution of the value effectively seized by the IT department since January 2014.”
It further added, “Cairn's principal claims are that the assurance of fair and equitable treatment and protections against expropriation afforded by the Treaty have been breached by the actions of the IT department, which is seeking to apply retrospective taxes to historical transactions already closely scrutinised and approved by India.”
Cairn has sought recompense from India for the loss of value resulting from the 2014 attachment of shares in CIL and the withholding of unrelated tax refunds, which together total approximately $1.4 billion.
