Retrospective tax raises its head

Cairn India looks a bit edgy today what Cairn Energy getting a tax notice. Cairn Energy holds 9.8% stake in Cairn India. The stock is lackluster but down in the red at Rs.145-47 levels and this after going down 4% intra day.

Cairn Energy of UK has received a slap from the Income Tax authorities of Rs.29,000 crore. This includes the back dated interest of Rs.18,800 crore which is more than the principal amount of Rs.10,200 crore. Cairn Energy disclosed the figures in its preliminary results declaration yesterday.

Cairn has made it clear that any tax recovery by the government would be limited to about Rs 3,216 crore assets of its subsidiary Cairn UK Holdings Ltd (CUHL).

The news is that the IT notice was issued before the Union Budget 2016-17 during which the government doled out a one-time offer to waive interest and penalty if the companies paid the principal amount to settle the retrospective tax disputes.

This apart, Cairn India itself is facing a tax notice - Rs 20,495 crore for failing to deduct withholding tax on alleged capital gains made by its erstwhile owner Cairn Energy. Cairn India is contesting the tax in Delhi High Court