Cairn India gets Rs 20,495 cr tax notice from I-T Department

The Reserve Bank of India (RBI) is looking to incentivise banks to make them more proactive in forming joint lenders’ forums (JLFs) and implement corrective action plans (CAP), sources said.
The central bank feels that banks need to be faster in pre-empting stress. “Even though banks decide on a CAP, they are unable to implement it as many lenders in the consortium do not get necessary approvals from their boards,” said a source.
Though details of how banks are going to be incentivised were not available immediately, it is understood that the central bank is much concerned about the inordinate delays in CAP implementation.
RBI mandates that banks have to arrive at a CAP within 45 days from the formation of a JLF. Banks are required to form a JLF when repayment in an account is overdue by 61 days. Such an account is called a special mention account (SMA-2). However, bankers pointed out that since bank boards do not meet very often and it takes time to prepare the CAP report to submit to the board, the entire process gets delayed.
In December, SBI chairman Arundhati Bhattacharya had said that banks are, at times, unable to convince their boards that the decision taken at a JLF meeting is the right way forward. “It is about the board being convinced that this is the right way and, then, taking a view based on the risk appetite,” she said.
For large banks like Bank of Baroda and Punjab National Bank, the boards meet once a month. However, the frequency also depends on the amount of new business that the bank has generated during the period and needs board approval.
According to a senior banker at a public sector bank, the time to arrive at a CAP, though revised to 45 days from 30 days earlier, is insufficient as every bank has to prepare a detailed report on the JLF proposal and submit it to the board.
“Bank boards do not always agree to what has been agreed upon by the lenders’ forum and it takes longer to convince the merit of the proposal to the board,” he had told FE. Last year, RBI had asked banks to classify loans according to its repayment overdues. Owing to that, JLFs were formed to find CAP for stressed loans.Source:http://www.financialexpress.com/

Cairn Energy is negotiating with Indian govt: What is the tax dispute all about?

Scotland-based hydrocarbons explorer Cairn Energy Plc has said it is in talks with Indian authorities to amicably settle a tax dispute dating back to when it listed its India unit in 2006. Chief Executive Simon Thomson told reporters, "Cairn continues to seek resolution of the tax issue in India and will take all necessary steps to protect shareholders' interests".

So, what is the tax dispute all about?

The company faces a potential tax demand on an alleged Rs 24,500 crore of capital gains it made when in 2006 it transferred all its India assets to a new company, Cairn India and got it listed on stock exchanges.
Cairn Energy, which had in 2011 sold majority stake in its Indian unit to mining group Vedanta for $8.67 billion, still holds 9.8 percent stake in Cairn India.

In January, the Income-Tax Department had in an order held that the Edinburgh-based firm made capital gains of Rs 24,503.50 crore when it transferred its entire India business from subsidiaries incorporated elsewhere, including tax havens like Jersey, to the newly incorporated Cairn India in 2006.

"There were some provisions in that budget in respect to dealing with the retrospective tax issue," the chief executive said. "We are waiting for clarification on those provisions."

In his maiden budget, Finance Minister Arun Jaitley said no new tax demand will be raised using the controversial retrospective tax law introduced in 2008.

Cairn is in dialogue with the tax authorities since January when it was barred from selling its 9.8 per cent stake in Cairn India Ltd. "Cairn continues to be restricted from accessing the value of its about 10 per cent residual shareholding in CIL valued at USD 1.1 billion whilst interaction with the Indian tax authorities continues," it said in a statement. The Group has not received a tax assessment or demand from the Income Tax Department.

"Cairn has re-confirmed with its advisers that throughout its history of operating in India the Company has been fully compliant with and paid applicable taxes under the legislation in force at the time," it said.

While the I-T Department has so far not raised a tax demand on Cairn Energy, it has ordered Cairn India not to allow the transfer of UK firm's residual stake. It also ordered that the shares cannot be pledged or mortgaged.

After transferring the assets, the Scottish explorer listed Cairn India on the stock exchanges through an initial public offering (IPO) in 2006 that raised Rs 8,616 crore. In 2011, Cairn Energy sold its majority stake in Cairn India to Vedanta but continues to hold 9.8 percent shares.

Cairn Energy was widely seen as a likely participant in the Indian firm's share buyback, which closed last month. The I-T Department started an investigation on January 15 to determine if capital gains tax was due from Cairn Energy's transfer of shares of Indian assets to Cairn India in 2006.

Meanwhile, the company is reportedly trimming its business to keep a lid on costs as it continued losing money over the first half of the year, with its Indian business under investigation by tax authorities.Source: http://firstbiz.firstpost.com/