In a statement, the oil company confirmed the I-T department's move, but said it will continue with the worldwide arbitration proceedings against the retrospective tax demand.
The Income tax (I-T) department has ordered coercive action against Cairn Energy Plc of the United Kingdom, including taking away more than Rs 2,000 crore dividend and tax refund, to recover part of the Rs 10,247-crore retrospective tax.
A top source said the department has already adjusted Rs 1,500 crore of tax refund that was due to Cairn Energy PLC, against the principal amount.
Today Cairn said that it was still waiting to be paid and that the Indian income tax department had recently issued a new order to Vedanta, which acquired the former Cairn India business. The company said it has a high level of confidence in its case under the UK-India Bilateral Investment Treaty, and is also seeking damages equal to the value of the its residual shareholding in Cairn India.
On June 9, an Income-Tax Tribunal looking into the matter had issued an order lifting the earlier restrictions on dividend payout to Cairn Energy.
The IT department has notified that dividend amount worth United States dollars 104 million will be seized from the company that is due to it from its stake in the erstwhile subsidiary Cairn India, which has now become Vedanta Ltd, along with another Rs 1500 crore tax refund due to the department, according to market reports.
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Cairn did an IPO in India-IPO proceeds are never taxed anyway-because it wanted to create an Indian asset, but the IPO could just as well have been done overseas which is where, at that point, various Cairn subsidiaries that held the India assets were located.
The I-T department had on March 31 issued a notice to Cairn Energy seeking Rs 10,247 crore tax and set June 15 as the deadline for payment.
Cairn said it was now due a total of $104m from Vedanta, including historical dividends of $53m and a further dividend of US$51m after the merger of CIL and VIL, with release of the dividend payment confirmed via an global arbitration tribunal in March.
The company commenced worldwide arbitration proceedings against Indian tax authorities in 2015. "Income tax authorities (ITA) have directed Vedanta Limited vide its order dated June 16, 2017 to pay over any sums due or will become due in future to Cairn Plc. Accordingly, we have advised the banks holding approximately ₹666 crore in the dividend account, to be transferred to the I-T authorities".
The company said the dividends due to Cairn Energy Plc for the last three years were lying in an unpaid dividend account as initially they were subject to an attachment and were not available for use by Cairn (now Vedanta Ltd).
Final hearings for the arbitration will take place in The Hague in the Netherlands in January 2018.