(Adds fund manager quote, details)
By Tommy Wilkes
NEW DELHI, March 12 (Reuters) - Britain's foreign ministerraised concerns in India on Thursday about a $1.6 billionretrospective tax bill charged to oil explorer Cairn Energy, andhad been reassured there are no other such cases.
Cairn this week filed a formal dispute against thedemand from India's tax department, in the latest high-profiletax row to hit Asia's third-largest economy.
Britain's Foreign Secretary Philip Hammond said FinanceMinister Arun Jaitley explained that the Cairn case was startedby the previous government and that New Delhi was powerless tostop it.
"The tax demand made to Cairn was very unwelcome," Hammondsaid after talks with Jaitley.
"I've had a very clear indication from Mr Jaitley...who isclear and categoric that this government will not be issuing anyfurther notices under the retrospective tax legislation," hetold reporters in New Delhi.
Jaitley is scheduled to arrive in London on Friday to drumup investment in his country and unveil a statue of MahatmaGandhi, who railed against British imperialism and led India toindependence.
The tax dispute is particularly embarrassing for PrimeMinister Narendra Modi's government after it made promises toend the tax battles that have damaged investor sentiment.
Modi's government has sought to move towards a tax-friendlyregime to boost much-needed foreign investment and reduce thetax battles that during the last government embroiledmultinationals including Vodafone Group, Royal DutchShell, IBM Corp and Microsoft Corp.
"The new government has been keen to improve the ease ofdoing business for foreign investors in India...including how itdeals with historic (tax) cases," said David Cornell, aLondon-based fund manager at India-focused Ocean Dial AssetManagement.
"There is no indication yet that it is changing, apart fromrhetoric."
Shares in Cairn fell to their lowest point since October2008 on Wednesday, but were up 2.9 percent at 1337 GMT onThursday.
Jaitley's pledge not to use the legislation to issue new taxnotices does not stop the courts from pursuing cases which beganunder the previous administration.
"There are legacy cases that are going to have be dealt within courts," Hammond said.
(Editing by Clara Ferreira-Marques, Frank Jack Daniel and SusanThomas)
