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I-T Seeks Rs 30,000 Crore Penalty From Cairn For Non-payment Of Tax
The Income Tax Department has slapped a fresh notice on British firm Cairn Energy, seeking up to Rs 30,700 crore in penalties for its alleged failure to pay Rs 10,247 crore capital gains tax on time
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The Income Tax Department has slapped a fresh notice on British firm Cairn Energy, seeking up to Rs 30,700 crore in penalties for its alleged failure to pay Rs 10,247 crore capital gains tax on time.
Within weeks of tax tribunal ITAT upholding levy of retrospective tax, the Income Tax Department first sent a fresh demand note of Rs 10,247 crore and another show cause notice asking as to why penalty should not be levied for its failure in paying tax on time and filing of returns.
Senior tax department officials said Cairn Energy has ought 10 more days to reply to the show cause seeking levy of penalty. "Capital gains was due on Cairn Energy on March 31, 2007, and due date for filing return was December 2007.
But the company filed return by March 31, 2014" after the tax department on January 24, 2014 sent a draft assessment order, an official told PTI.
The assessment, the official said, got completed in January 2016 and a final order was issued raising a tax demand of Rs 10,247 crore and another Rs 18,800 crore in interest for 10 years.
The ITAT, however, in its March 9 order held that while Cairn Energy was liable to pay tax on the 2006 transfer of India assets to newly created Cairn India, prior to its listing, interest cannot be charged as the demand was raised using retrospective tax legislation.
The official said the ITAT had not barred levy of penalties and so the fresh notice is being sent.
The Income Tax Act provides for penalties of 100 per cent to 300 per cent of the tax due, the official said, adding that the notice sent does not mention of the quantum of penalties the tax department is seeking.
"It is a show cause kind of a notice and further action will follow based on the response the company files," the official said, adding that the tax department has six months from the passage of ITAT order to impose penalty.
The penalties are being sought under Section 271 (1)(c) of the Income Tax Act for failing to pay tax on capital gains made. A Cairn Energy spokesperson could not be immediately reached for comments.
The company had earlier this month in a notice to shareholders acknowledged that it had received an amended tax demand on March 31, 2017 that also talked about late payment of interest to be charged from February 2016 -- 30 days following the date of the final assessment order.
The final assessment order did not include any penalties which may also be applied to the final assessment (potentially up to 300 per cent of any tax finally agreed), it had said. Following the January 2014 draft assessment order, the tax department had restrained the company from selling the residual 9.8 per cent stake it holds in Cairn India.
Cairn Energy had in 2011 sold Cairn India to Vedanta. The company had in the shareholder notice stated that it strongly contests the final assessment order and that the enforcement of any tax liability deemed due by the tax department will be limited to India assets, which had a value of about USD 750 million as of December 31, 2016.
These assets comprised principally Cairn's residual shareholding in Cairn India. Cairn also said that it had on March 11, 2015 filed a Notice of Dispute under The UK-India Investment Treaty in order to protect its legal position and shareholder interests.