Cairn Energy CEO urges Modi to resolve tax row

NEW DELHI: Cairn Energy Plc CEO Simon Thomson has written to Prime Minister Narendra Modi seeking clarity on the British oil explorer’s Rs 10,247-crore tax dispute in light of the PM’s statement in London that the government “will not resort to retrospective taxation and has demonstrated this position in a number of ways”.
Thomson said the dispute has been dragging on for almost two years and has resulted in $1-billion loss in value, forcing Cairn Energy to sell assets, postpone investment and cut workforce by 40%.
In January 2014, Cairn Energy was slapped with a Rs 10,247-crore assessment notice on alleged capital gains made on a 2006 internal reorganization. No tax demand has been raised so far. “Following your public comments in London, I would be grateful if you could please clarify the position on Cairn’s retrospective tax case,” he wrote.
The company denied any tax was due even if the retrospective amendments to Income Tax Act are applied as the group reorganization had not resulted in any real income accruing to it.
“This is a very unfortunate conclusion to our 20-year investment in India where Cairn has been a model corporate citizen and created a legacy asset, which is seen as an excellent example of what can be achieved through India and UK cooperation,” he wrote.
Thomson said the company wants a “constructive and open dialogue with the Government of India and would welcome the opportunity to proceed to a satisfactory resolution which is beneficial to both India and Cairn Energy Plc”.
The income tax department says Cairn Energy allegedly made a capital gain of Rs 24,504 crore in 2006 while transferring all its India assets to a new company, Cairn India, and getting it listed on the stock exchanges.
Cairn Energy, which had in 2011 sold majority stake in its Indian unit to mining group Vedanta for $8.67 billion, still holds 9.8% stake in Cairn India. But the I-T department has barred the British explorer from selling this stake.
The tax matter “is having a major detrimental impact on our business and to our UK and international shareholders”, Thomson said, expressing willingness to meet Modi.