With its subsidiary Cairn India facing Rs20,495-crore tax notice, billionaire Anil Agarwal-led Vedanta Group on Sunday said it is “frustrated” by the tax demand raised on it using retrospective legislation. The Income Tax Department had in March slapped a Rs20,495 crore tax demand on Cairn India for failing to deduct withholding tax on alleged capital gains made by its erstwhile promoter, Cairn Energy Plc.
“My own view is that these types of cases don’t help India’s reputation in the international market. I was in Beijing last week and met some of the biggest fund houses from around the world and they were all asking what is going on in India,” Vedanta chief executive Tom Albanese told PTI in an interview here. Cairn India, which is 60 per cent owned by Vedanta and is being merged with the metal and mining firm, has stated that it does not agree with the tax demand and had challenged it in the Delhi High Court.
The Rs20,495-crore tax demand is besides I-T Department slapping a Rs10,247-crore tax demand on Cairn Energy Plc for an alleged Rs24,500-crore worth capital gains it made in 2006 while transferring all of its Indian assets to a new company, Cairn India, and getting it listed on the stock exchanges. “Our intention is to invest in India. We are frustrated by this tax case,” he said.
Cairn Energy too has challenged the tax demand and has initiated arbitration under the India-UK Bilateral Investment Protection Treaty. The Income Tax Department had alleged that Cairn India failed to deduct withholding tax on alleged capital gains arising during 2006-07 in the hands of Cairn UK. The demand of Rs20,495 crore comprises of tax of Rs10,248 crore and interest of approximately Rs10,247 crore.
Cairn India says it has always been fully compliant with all Indian income tax laws. “Income tax assessments, including transfer pricing assessment were duly completed for financial year 2006-07, earlier,” it had previously said. The company is latest to join a slew of multinational firms, including Vodafone Group Plc and Royal Dutch Shell Plc, to face tax demand owing to a retrospective tax law.