British explorer Cairn Energy plc on Tuesday said it has initiated an international arbitration to seek $5.6 billion in compensation from the Indian Government in case a retrospective tax demand of Rs 29,047 crore is not quashed.
In its half-yearly earnings statement, the company said its subsidiary Cairn UK Holdings ltd has received an assessment order from the Indian Income Tax Department relating to the intra-group restructuring undertaken in 2006 prior to the IPO of its India unit, which cites a retrospective amendment to Indian tax law introduced in 2012.
“Cairn strongly contests the basis of this attempt to retrospectively tax the group for an internal restructuring,” it said in the statement. The assessment order levies a tax of Rs 10,247 crore plus Rs 18,800 crore of interest back dated to 2007. “The total assets of CUHl have a current value of $475.2 million (about Rs 3,180 crore), comprising principally the group's 9.8 per cent shareholding in Carin India ltd and any recovery by the Indian authorities would be limited to such assets,” the statement said.