UK's Cairn Energy has been issued with a tax demand notice of over £2.90 billion by Indian income tax department, including a £1.88 billion in back-dated interest.
“The assessment order is in the amount of £1.02 billion approximately, plus interest back dated to 2007, totalling £1.88 billion,” Cairn Energy said. The notice is issued at a time when the government had declared it will not raise any fresh tax demand using retrospective tax legislation. However, the notice was issued before finance minister Arun Jaitley made a one-time offer in his Budget for 2016-17 to waive interest and penalty if the companies paid the principal amount to settle the retrospective tax disputes.
Sources said according to income tax rules, an assessment order issued has to be closed within two years and the notice issued now is to close that assessment. “Cairn strongly contests the basis of this attempt to retrospectively tax the group for an internal restructuring,” the company said, adding it has initiated international arbitration to settle the tax dispute.
