British oil explorer Cairn Energy Plc has told its shareholders the firm is facing a penalty of upto Rs 10,200 crore over and above the Rs 29,000 crore in tax and interest demand slapped by the Indian income tax authorities involving a case of retrospective legislation.
The company, in a circular to shareholders dated 6 April, said it had on February 4 received a final assessment order from the Indian Income Tax Department in amount of Rs 10,200 crore plus interest back dated to 2007 totalling Rs 18,800 crore.
“The aggregate amount of Rs 29,000 crore excludes any applicable penalties which may also be applied to the final assessment (potentially up to 100 per cent of the final assessment order, excluding interest),” the firm said.
It added that Cairn strongly contests the final assessment proceedings in India and is pursuing its rights under Indian law to appeal the assessment, both in respect of the basis of taxation and the quantum assessed and to protect from enforcement against the assets of CUHL (Cairn UK Holdings Ltd). An e-mail sent to Cairn seeking clarification on the circular remained unanswered.
The I-T Department had on January 22, 2014 issued a draft assessment order of Rs 10,247 crore on alleged capital gains Cairn made in a 2006 reorganisation of its India business. The final assessment order was issued on February 4, 2016.
The notice was, however, issued before Finance Minister Arun Jaitley in his Budget for 2016-17 made a one-time offer to waive interest and penalty if the companies paid the principal amount to settle the retrospective tax disputes.
The company said it had on March 11 this year filed a Notice of Dispute under The UK-India Investment Treaty to protect its legal position and shareholder interests.