Income Tax Department has ordered a coercive action against Cairn Energy of UK, including taking away over £200 million dividend and tax refund to recover part of the £1.02 billion retrospective tax. A top source said the department has already adjusted £150 million of tax refund due to Cairn Energy Plc, against the principal amount. It sent a notice, on June 16, under Section 226(3) of the Income Tax Act to the company's erstwhile subsidiary, Cairn India Ltd, saying whatever is due to the British firm in the form of dividend should be transferred to the government.
The source said over £65 million, in past and current dividend, is due to the company, and it was likely to be transferred to the exchequer by this week. The department will next move to take 9.8 per cent residual stake that Cairn Energy retains in Cairn India even after selling the erstwhile subsidiary to Vedanta. The source said that the tribunal refused to entertain Cairn India to release dividend due to it. The Assessing Officer is in the process of drawing a certificate under the Income Tax Rules, 1962 for recovery of tax, as per which, the tax recovery officer will go ahead to attach the shares and sell them.
It, however, added that the sale might not happen immediately as the tax department will wait for the best price, and that the shares can be sold to LIC or Vedanta whosoever quotes the best price. The IT department had issued a notice on March 31, to Cairn Energy seeking £1.02 billion tax and set June 15 as the deadline for payment. ITAT had upheld levy of retrospective tax on 2006 transfer of shares by the UK firm to a newly created Indian unit Cairn India.
“On June 16, 2017 the Indian Income Tax Department issued an order to Vedanta India Ltd directing it to pay over any sums due to Cairn. Sums due to Cairn from VIL now total USD 104 million, including historical dividends of USD 53 million and a further dividend of USD 51 million after the merger of CIL and VIL,” it said.
