UK’s Cairn Energy Plc. on Tuesday March 15,2016 said it was served a tax assessment
notice of Rs 28,200 crore by the income tax department for recovering
alleged dues. Here’s a quick recount of what has happened in the case so
far.
Why the tax notice?
The tax department wants to recover capital gains tax from Cairn’s asset re-organisation under Cairn India before its initial public offer in 2006-07.
The I-T Department on January 22, 2014, issued a draft assessment order of Rs 10,247 crore on alleged capital gains it made in a 2006 reorganisation of its India business and last month issued a final assessment order.
The assessment order added interest of Rs 18,800 crore from 2007 on top of the principal amount of Rs 10,247 crore.
When was the notice first filed?
In January 2014, Cairn Energy received two notices from the I-T dept, requesting it to file tax returns for year that ended on March 31, 2007 -- the year of asset re-organisation.
In March 2015, the tax department served a draft tax order to Cairn Energy.
In February 2016, a final tax order was served to Cairn Energy.
What is this tax?
The tax notice has been served under the controversial retrospective provision of taxing capital gains.
Cairn Energy’s response so far:
The company is disputing the tax notice under the Indo-UK bilateral investment treaty. The matter is now in an International Court of Justice for arbitration.
India’s response so far:
Though the government has appointed an arbitrator, it holds that tax disputes cannot be litigated under bilateral treaties
The tax department wants to recover capital gains tax from Cairn’s asset re-organisation under Cairn India before its initial public offer in 2006-07.
The I-T Department on January 22, 2014, issued a draft assessment order of Rs 10,247 crore on alleged capital gains it made in a 2006 reorganisation of its India business and last month issued a final assessment order.
The assessment order added interest of Rs 18,800 crore from 2007 on top of the principal amount of Rs 10,247 crore.
In January 2014, Cairn Energy received two notices from the I-T dept, requesting it to file tax returns for year that ended on March 31, 2007 -- the year of asset re-organisation.
In March 2015, the tax department served a draft tax order to Cairn Energy.
In February 2016, a final tax order was served to Cairn Energy.
What is this tax?
The tax notice has been served under the controversial retrospective provision of taxing capital gains.
Cairn Energy’s response so far:
The company is disputing the tax notice under the Indo-UK bilateral investment treaty. The matter is now in an International Court of Justice for arbitration.
India’s response so far:
Though the government has appointed an arbitrator, it holds that tax disputes cannot be litigated under bilateral treaties
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