New Delhi : The Income Tax Department has seized a further Rs 440 crore of dividend income due to Cairn Energy to recover a part of the Rs 10,247 crore tax demand it had raised on the British firm using a retrospective tax legislation.
The tax department had previously seized Rs 666 crore of dividends due to Cairn from its 4.95 per cent residual holding in Vedanta. It has also refused to pay tax refund of Rs 1,594 crore due to Cairn as a result of overpayment of capital gains tax to recover the dues.
Sources said Vedanta, owned by billionaire Anil Agarwal, had last month declared for shareholders a Rs 21.2 per share dividend and a 7.5 per cent payment on preference shares. For Cairn, the total receivable came to about Rs 440 crore. But due to an Income Tax Department order, Vedanta transferred that money to a separate account. This was then taken over by the tax department. The action comes ahead of the beginning of the final hearing in the arbitration initiated by Cairn to oppose the retrospective tax demand which was raised on a 2006 internal reorganisation of the firm’s India unit, called Cairn India.
Cairn India was in 2011 acquired by Vedanta but the UK firm continued to hold 9.8 per cent shareholding. Cairn India was last year merged into Vedanta. On merger, Cairn Energy’s holding in Vedanta came to 4.95 per cent. A spokesperson of the Central Board of Direct Taxes (CBDT) confirmed taking over the dividend, saying its assessment order dated March 9, 2015 raised a tax demand of Rs 1,0247 crore.