Weeks before an international arbitration tribunal rules on retrospective tax levied by India, the Income Tax Department has sold almost all of Cairn Energy Plc's attached shares to recover a part of the Rs 10,247 crore retrospective tax demand, regulatory filings showed.
While the Indian government had used a 2012 legislation to tax certain past income of at least half a dozen foreign companies such as Vodafone Plc, Cairn Energy of the UK remains the only company against whom the demand has been enforced and it remains to be seen if an arbitration award against it will be honoured.
Cairn Energy held 4.95% stake in mining major Vedanta Ltd. which the Income Tax Department had attached after issuing a Rs 10,247 crore tax demand in 2014 on alleged capital gains the British firm made on a decade-old reorganisation of its India business.
The Income Tax Department in May and June sold about 2% stake held by Cairn in Vedanta.
Vedanta in its March quarter filing of shareholding pattern to stock exchanges showed 18.41 crore (4.95%) shares being held by Tax Recovery Officer (International taxation)-I. This in the June quarter filing dropped to 11.96 crore shares (3.22%). ?
In its filing for the September quarter, Vedanta did not list the Income Tax Department as holding any shares (greater than 1%).
As per statutory requirement, a company is obliged to list all entities holding more than 1% stake.
The shareholding pattern at the end of September did not list Income Tax Department as holder of shares in that section, implying that either all of the shares have been sold or that such shareholding has fallen below 1%.
Reached for comments, a Cairn Energy spokesperson said: "The international arbitration case under the India UK Bilateral Investment Treaty is in its final stages."
"In March 2015, Cairn filed a Notice of Dispute under the Treaty in order to protect its legal position and seek restitution of the value effectively seized by the Income Tax Department in and since January 2014.