Cairn Restricted by Income Tax Department
CAIRN Energy Pls, in its half yearly report released yesterday states:
On 10 March 2015, Cairn received a draft assessment order from the Indian Income Tax Department in relation to the Cairn Group restructuring that was undertaken in 2006 prior to the Cairn India Limited IPO. The draft assessment order was to the amount of INR 102.4 billion (USD 1.6 billion) plus any applicable interest and penalties. Cairn has appealed against the draft assessment in India and furthermore has filed a Notice of Dispute under The UK-India Investment Treaty in order to protect its legal position and shareholder interests. Cairn has appointed an arbitrator and awaits the Government of India to name its appointment to the international panel.
No provision has been made in the financial statements relating to this draft assessment.
Cairn strongly contests the basis of the draft assessment and the Notice of Dispute is supported by detailed legal advice on the strength of the legal protections available to it under international law. In addition, Cairn will also seek restitution of losses resulting from the attachment of its CIL stake since 2014.
Cairn continues to be restricted by the Indian Income Tax Department from selling its 10% shareholding in CIL, with a market value of 30 June 2015 at USD 525.5m. The Indian Tax Department has also issued an assessment to Cairn India Limited, the Company's former subsidiary, for failure to withhold tax in the amount of INR 102.4 billion (USD 1.6billion), plus a further INR 102.4 billion (USD 1.6billion) in interest and penalties in relation to the Cairn Group restructuring that was undertaken in 2006 prior to the IPO.