Indian authorities have sent Cairn Energy a tax bill for $4.4 billion, the company said Tuesday, the latest chapter in a long-running row that has stoked foreign firms' fears of retrospective tax demands.
The British oil explorer has been locked in a dispute with the Indian government since 2014 over $1.6 billion authorities say it owes in backdated tax.
Announcing preliminary results Tuesday, Cairn Energy said it had received an "assessment order" which includes the addition of 188 billion rupees ($2.8 billion) in interest dating back to 2007.
The tax demand relates to internal restructuring undertaken by the group in 2006, before it floated its former India division Cairn India on the Bombay Stock Exchange.
Cairn Energy staunchly rejects the tax claim and the matter has now gone before an arbitration panel.
"The tax issue is now more than two years old and we have commenced international arbitration proceedings to settle the dispute," a spokesman for the oil explorer said.
"Cairn is claiming full compensation for the $1 billion value of which its shareholders have been deprived," he said.
Cairn Energy still holds a stake of around 10 percent in the India firm, which New Delhi has prevented it from selling until the dispute is resolved.
Any assets the Indian government could seek to seize are limited to about $477 million, the company said.
In 2012 India's then Congress-led government amended its tax laws to allow it to retrospectively tax foreign companies.
Despite fierce protests from foreign companies, Prime Minister Narendra Modi's administration has not moved to repeal the law, although it has sought to reassure companies that retrospective taxation is a thing of the past.
But companies are still battling the government, with telecoms firm Vodafone embroiled in a high-profile case.
In a February letter to Vodafone International Holdings BV, its Netherlands' subsidiary, authorities threatened to seize its assets in India if it did not pay a tax bill of 142 billion rupees.
Finance Minister Arun Jaitley, presenting India's budget last month, offered a one-time dispute resolution for ongoing cases, saying interest and penalties would be waived if companies paid outstanding tax.