Cairn India tumbles on tax disputes

The Income Tax Appellate Tribunal (ITAT) has defended the income tax department order of Rs 10247 crore related to capital gains tax levied on Cairn, UK. The demand was in respect of Cairn UK transferring shares of Cairn Indian Holdings to Cairn India as part of an internal group reorganisation in 2006-07, resulting in heavy capital gains, preceding an initial public offering (IPO) of shares by Cairn India.

According to the Income Tax department, Cairn UK now known Cairn Energy has made a capital gain of Rs 24504 crore and it is subject to taxation.

The transaction of reorganisation of its India unit is 10 years old and has now been sent a notice by the IT department. Cairn Energy also clarified that international arbitration proceedings are progressing in respect of Cairn’s claim under the UK-India Bilateral Treaty, which challenged the IT department's notice; and the main statement of claim and the statement of defence have now been submitted.

The stock price of Cairn India declined 2.05 per cent in early trade, and is trading at Rs 278.7 on an intraday basis.