UK’s Cairn Energy Plc. on Tuesday 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 department seeks to recover Rs 10,200 crore as principal tax dues and interest dating back to 2007, totalling Rs 18,800 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.