I-T dept confiscates dividend and fund

The Income Tax Department has ordered coercive action against Cairn Energy of UK, including taking away over Rs 2,000 crore dividend and tax refund, to recover part of the Rs 10,247 crore retrospective tax.

This follows British oil firm losing in an international arbitration tribunal its challenge against India's I-T department taking coercive action to recover the tax dues. 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. On June 16, it sent a notice under section 226(3) of the Income Tax Act to the company's erstwhile subsidiary, Cairn India Ltd (now Vedanta India Ltd), saying whatever is due to the British firm in the form of dividend should be transfered to the government.

As much as $ 104 million or about Rs 650 crore, in past and current dividend, is due to the company, the source said, adding that it was likely to be transfered to the exchequer today or by tomorrow. Next, the department will move to take 9.8 per cent residual stake that Cairn Energy retains in Cairn India even after selling the erstwhile subsidiary to Vedanta. The source said the tribunal refused to entertain Cairn Energy's pleas for restraining the I-T department from taking any coercive action and ordering Cairn India to release dividend due to it.