Cairn India moves HC against tax demand

New Delhi : Cairn India on Monday moved Delhi High Court seeking quashing of income tax department’s demand order to pay Rs.20,495 crore tax.

The company allegedly failed to pay taxes on gains made by its former parent in a share transfer transaction in fiscal 2006-07.

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The company, part of the Anil Aggarwal-controlled Vedanta group, moved the court against income tax department’s order asking it to pay the tax and a direction to tax authorities to take no coercive steps for recovery of demand.

Cairn India said that the tax proceedings should be quashed as these were initiated after a lapse of more than six years from the end of 2006-07. The plea said that the courts have held that proceedings should be initiated within a reasonable period of four years.

It said that it cannot be penalised because it could not have withheld tax anticipating a retrospective amendment.

“There was no taxable gain and, accordingly, no liability to withhold tax on the date of payment,” it said.

The tax demand is for alleged failure to deduct withholding tax on alleged capital gains arising during 2006-07 in the hands of Cairn UK Holdings Limited (CUHL), the erstwhile parent of Cairn India, a subsidiary of Cairn Energy Plc. The Rs.20,495 crore tax demand comprises Rs.10,248 crore tax and Rs.10,247 interest.