Vedanta releases Rs666-cr Cairn dividend to I-T Dept

20 Jun 2017

Vedanta Ltd is reported to have agreed to hand over Rs666 crore (about $104 million) in unpaid dividend due to Cairn Energy, lying in a frozen account, to the income tax department, following orders from the tax authorities.

Indian tax authorities pursuing a Rs10,247-crore retrospective tax case against the erstwhile Cairn India (now Vedanta India Ltd) decided to extract the dividend amount of Rs666 crore payable to Cairn Energy Plc after the latter lost an arbitration in an international tribunal.

The dividends due to Cairn Energy for the last three years were lying in an unpaid dividend account as they were frozen by an attachment order by the Income Tax Department.

Reports quoting Vedanta sources said the company's decision to transfer the Rs666 crore dividend due to Cairn Energy Plc to the Income Tax Department followed an order from the tax authorities.

Cairn Energy Plc, the UK parent of Cairn India (now part of Vedanta Resources), has been contesting Income Tax Department's claims in a case that relates to the merger of Cairn India with Vedanta India Ltd.

According to Cairn Energy, Vedanta owes $104 million, including historical dividends of $53 million and a further dividend of $51 million after the merger of Cairn India and Vedanta.

The 16 June direction from the tax authorities comes as of 9 June this year, a tribunal issued a formal order recounting confirmations from the Indian government that the dividends were no longer restricted and authorising Cairn India, now Vedanta, to pay the amounts.

According to Cairn Energy, sums (dividend) due to it from Vedanta India now stood at $104 million, including historical dividends of $53 million and a further dividend of $51 million.

Cairn Energy, however, said it will continue with the international arbitration proceedings against the retrospective tax demand.

''Cairn is seeking full restitution for (UK-India Bilateral Investment Treaty) breaches resulting from the expropriation of its investments in India in 2014, the attempts to enforce retrospective tax measures and the failure to treat the company and its investments fairly and equitably,'' it said.

The company said it has a high level of confidence in its case under the treaty and, in addition to resolution of the retrospective tax dispute, its claim seeks damages equal to the value of the group's residual shareholding in Cairn India at the time it was attached (approximately $1 billion).

The company commenced international arbitration proceedings against Indian tax authorities in 2015. The seat of the arbitration is The Hague in the Netherlands and final hearings for the tribunal are scheduled for January 2018.

''Cairn UK Holdings Limited (CUHL), a direct subsidiary of Cairn Energy Plc, received an assessment order from the Indian tax authorities relating to the intra-group restructuring undertaken in 2006 prior to the IPO of Cairn India. It cited a retrospective amendment to the Indian tax law introduced in 2012 and claimed Rs10,200 crore (approximately $1.5 billion) plus interest back dated to 2007 totalling Rs18,800 crore (approximately $2.8 billion). The total assets of CUHL comprise the group's 9.8 per cent shareholding in Cairn, which has now been converted to a shareholding in Vedanta and any recovery by the Indian authorities would be limited to such assets,'' Cairn Energy Plc said.