New Delhi : Tax tribunal ITAT as upheld levy of Rs 10,247 crore capital gains tax on UK’s Cairn Energy Plc but has held that interest cannot be charged on it as the demand was raised using retrospective tax legislation.
ITAT, in an order dated March 9, 2017, held that Cairn Energy was liable to pay the tax on share transfer it did through an internal reorganisation of its India business in 2006, prior to getting Cairn India listed on stock exchanges.
The tribunal also said that Cairn India should have withheld tax on capital gains made by its parent company.
It was parallely sent a demand notice by the Income Tax department for not doing so. Cairn Energy had approached ITAT after it was slapped with an tax assessment order of Rs 10,247 crore in January 2014. Later, it also initiated international arbitration against the tax demand, which is still pending, reports PTI.
The I-T department had raised a total tax demand of Rs 29,047 crore on Cairn Energy, including Rs 18,800 crore in backdated interest.
A similar tax demand was also raised on Cairn India, the Indian subsidiary of Cairn Energy which the British firm sold to Anil Agarwal’s Vedanta Group in 2011.
In its plea before the ITAT, Cairn Energy had said that the assessing officer had “erred” in raising tax demand by invoking the retrospective amendment to Section 9 of the Act introduced in the Finance Act, 2012, which was not on the statute when the India-United Kingdom Tax Treaty entered into force.
