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Cairn stands its ground over tax notices

CAIRN Energy is giving no ground in its fight with the Indian authorities over tax, after receiving two further notices about its financial arrangements.

The Edinburgh company is adamant that it owes no tax relating to its bumper discoveries in Rajasthan. Cairn's shares closed down 0.2p or 0.1% at 166.8p.

Cairn revealed in January that it had received a request from the Indian Income Tax Department about transactions undertaken by its Cairn UK Holdings subsidiary in the financial year to March 31, 2007, when it floated Cairn India on the stock market.

The company said that Cairn UK Holdings had filed a nil return for the year on the grounds that none of the transactions undertaken by it was chargeable to tax in India.

The company has now received a notice asking Cairn Energy itself to file a tax return for the 2007 financial year.

"Cairn intends to file a nil return for this notice," the company told investors.

A second notice said that Cairn UK Holdings should have withheld tax on dividends paid to its parent, Cairn Energy. Cairn said it plans to respond refuting this claim.

"Throughout its history of operating in India, Cairn has been compliant with the tax legislation in force in each year. Cairn has stated that it intends to take whatever steps are necessary to protect the company's interests," the company said.

Cairn remains prevented from selling its remaining 10.3% sake in Cairn India to Vedanta, which it had hoped would help fund exploration elsewhere. It has also been forced to halt a $300 million (£182m) share buy-back scheme due to the probe.

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