New Delhi: Close on the heels of Vodafone being served a notice by the Income Tax department over tax dues that the company considers disputed comes another notice – this time to UK-based Cairn Energy. The case relates to a 2006-07 tax demand on capital gains accrued from the sale of one of its subsidiaries.
In the latest move, the I-T department has slapped a Rs 18,800 crore tax demand on Cairn. According to PTI, the demand includes a Rs 8,600-crore interest backdated to 2007.
The move follows an assurance by Finanace Minister Arun Jaitley during his Budget speech in 2015 that the government would not open fresh cases for retrospective taxes. He had, however, refused to scrap the retrospective taxation law and said that the pertinent court cases must be brought to their logical ends in courts and tribunals.
The IT department, however, did not pay heed and slapped a Rs 20,495 crore notice on Cairn India in February last year, following it up with a tax notice of Rs 10,247 crore two days later.
During the Budget speech of 2016, Jaitley said that the government has set up a statutory mechanism to resolve such issues. He said that the government is making a one-time offer to pay up the principal tax and get the retrospective tax and consequent interest liability to be waived off.
While Cairn Energy had shared its disappointment with the notice in 2015, even asking its lawyers to approach UK-India Investment Treaty to resolve the matter, the Central Board of Direct Taxes had said that tax demands on companies like Cairn Energy and Vodafone cannot be refuted.
"As long as the retrospective amendment of the IT Act passed by Parliament remains valid, the demand (of tax against them) remains valid," CBDT Chairman Atulesh Jindal had said.
The notice relates to Cairn India's failure to deduct withholding tax on alleged capital gains arising during 2006-07 in the hands of Cairn UK Holdings Limited (CUHL), the erstwhile parent company, a subsidiary of Cairn Energy Plc.
The CBDT said that the company should avail the one-time dispute resolution scheme announced in the Budget to close the issue by paying the principal tax and getting a waiver on interest and penalty.
Revenue Secretary Hasmukh Adhia has earlier said that the government cannot waiver multi-billion dollar tax liabilities of Vodafone India and Cairn India, among several other companies.
(With PTI inputs)