Cairn India, Vedanta Merger Only After Settling Tax Dispute: Govt
New Delhi: In a setback to mining mogul Anil Agarwal, the government on Monday said he can merge subsidiary Cairn India with his flagship Vedanta only after paying for the shares the Income Tax Department has attached following the .₹ 10,247-crore tax dispute.
Atop government official said the merger can go ahead if the 9.8% shareholding of Cairn Energy attached by the I-T Department is paid for or an equivalent bank guarantee is furnished or approval is given for issue of fresh shares. Agarwal’s Vedanta Group had in 2011 acquired Cairn India from its British promoters, Cairn Energy, and last year proposed to merge the cash-rich firm with BSE-listed Vedanta. However, a tax demand on both Cairn Energy and Cairn India under a retrospective legislation is now posing as a hurdle to the merger.
Clarifying on the issue, Revenue Secretary Hasmukh Adhia said: “The only constraint in this case could be that the shares of Cairn Energy in Cairn India cannot be alienated without the permission of the government.” “However, the merger can take place subject to the law of land once this issue of attachment is resolved... Under the Section 281 of the I-T Act, you cannot dispose of shares without permission of the Tax Department.” The I-T Department using the retrospective tax legislation had issued a .₹ 10,247-crore tax notice to Cairn Energy in January 2014.
In February this year, the department issued a final assessment order seeking over .₹ 29,000 crore in tax from Cairn Energy, including .₹ 18,800 crore in interest.