In a circular to shareholders, the company said it had on February 4 received "a final assessment order from the Indian Income Tax Department in amount of Rs 10,247 crore plus interest back dated to 2007 totalling Rs 18,800 crore.
"The aggregate amount of Rs 29,000 crore excludes any applicable penalties which may also be applied to the final assessment (potentially up to 100 per cent of the final assessment order, excluding interest)."
The notice was, however, issued before Finance Minister Arun Jaitley in his Budget for 2016-17 made a one-time offer to waive interest and penalty if the companies paid the principal amount to settle the retrospective tax disputes.
"Cairn strongly contests the final assessment proceedings in India and is pursuing its rights under Indian law to appeal the assessment, both in respect of the basis of taxation and the quantum assessed and to protect from enforcement against the assets of CUHL," the company said in the circular.
Also Read
Enforcement of any tax liability deemed due by the Indian Income Tax Department "will be limited to the assets of CUHL which have a current value of approximately USD 477 million, and comprise principally Cairn's residual 10 per cent shareholding in Cairn India, which has already been provisionally attached by the Indian Income Tax Department," it said.
I-T Department alleges that Cairn Energy made a capital gain of Rs 24,503.50 crore in 2006 when it transferred shares of Indian assets that were held in a subsidiary set up in the tax haven of Jersey, to newly incorporated Cairn India.
Cairn Energy still holds 9.8 per cent in Cairn India.
The company said it on March 11 this year filed a Notice of Dispute under The UK-India Investment Treaty to protect its legal position and shareholder interests.
Cairn said it strongly contests the basis of the
assessment order and the Notice of Dispute is supported by detailed legal advice on the strength of the legal protections available to it under international law.
The company said in addition to the resolution of the tax dispute, it is also seeking full recompense for the loss of value resulting from the restriction on its shares in Cairn India.
Cairn Energy has not received any dividend from Cairn India during the previous three years. It said it was entitled to receiving total dividend of about USD 38 million held by Cairn India in escrow for CUHL.
"The total assets of the Cairn subsidiary against which the Indian Tax Authorities are seeking to pursue a tax claim are USD 477 million, including primarily the group's near 10 per cent shareholding in Cairn India Ltd and any recovery by the authorities would be limited to these assets," it added.