In a major relief to Nokia, Delhi High Court has finally lifted the stay order on the ownership transfer of Nokia India’s immovable assets in the country, reports The Economic Times.
This will enable Nokia India to transfer all its Indian factory assets to Microsoft by Q1 2014 (when the Microsoft-Nokia agreement is expected to close). Delhi High Court had earlier put an interim stay on the transfer of Nokia India’s ownership rights for any of its immovable assets in September 2013, following which Nokia India had moved to the Delhi High Court last month seeking a lift of the stay order by December 2013.
Nokia India had also told the court that it was willing to pay a minimum deposit of Rs.2,250 crore as taxes immediately after the sale, which was rejected by the Income Tax Department earlier this month.
However the court has now directed Nokia India to deposit minimum Rs 2,250 crore in a escrow account, details of which will be provided to the IT department within one month of the Microsoft agreement. Note that this amount can go higher if the payment from Microsoft increases. Nokia also has to take an undertaking of paying another Rs 3,500 crore if it loses the case along with a letter which guarantees compliance with the order when the dispute has been resolved. In addition to this, Nokia India will continue to pay Rs 700 crore in installments as per the June 2013 order.
The Court has also mentioned that only Nokia India and its parent company will be liable for taxes and this liability will not be shifted to Microsoft after the deal is completed.
Acknowledging this judgement, Poonam Kaul, Director-Communications, Nokia IMEA told in a statement that the company will now start preparing for the planned asset transfer and noted that there are still a number of statutory clearances that remain before the assets transfer, which they expect to be in line with international treaties and practices.
Nokia Staff Union’s president M Saravanakumar told Business Standard that Nokia India has sent a notice to its employees informing that the transfer is expected to happen between January and March 2014 after securing requisite approvals from the government. Citing sources, the report says that around 45 different approvals are required for the transfer, most of which have to be sought by Microsoft.
Nokia Tax Case Until Now
– In January 2013, the Income Tax department had asked Nokia India for a clarification on non-payment of ‘tax deducted at source’ (TDS) on software supplies and on change in accounting model. Its officials had also conducted tax raids on Nokia India’s Sriperumbudur (Tamil Nadu) plant and offices in Chennai. The Indian authorities claims that the tax invasion involves payment for royalty on software to Nokia’s parent company in Finland.
– In February 2013, Nokia Corporation sent letters of complaint to Indian tax authorities saying that tax officials in January raided its manufacturing facility in Chennai without giving a reason suggesting that this was illegal. At that time, Nokia also claimed that its transfer pricing policies are in accordance to the Indian and Finnish laws.
– In April 2013, Nokia had filed a petition with the Delhi High Court and had received an interim stay order. However, the company apparently withdrew its application later and the Delhi High Court had directed Nokia to file an appeal with the Commissioner of Income Tax (Appeals), as indicated by an NDTV report.
– In June 2013, the commissioner of Income Tax (appeals) had dismissed Nokia India’s plea against the Rs 2,100 crore tax claim by the Income Tax (IT) department. In the same month, Finland’s finance ministry had also launched a mutual agreement procedure with its Indian counterpart under the bilateral Double Taxation Avoidance agreement to resolve this issue.
– In September 2013, Delhi High Court has put an interim stay on Nokia India transferring the ownership rights for any of its immovable assets and had asked the company to inform the assessing officer before sending back money overseas.
– In November 2013, Nokia moved to the Delhi High Court seeking a lift on the stay order. It had also told the court that it was willing to pay a minimum deposit of Rs 2,250 crore as taxes immediately after the sale and deposit any additional surplus if the sale price is much higher, after adjusting for outstanding liabilities, excluding income tax liabilities.
– In December 2013, Income Tax (IT) Department had told the Delhi High Court that Nokia’s Rs 2,250 crore offer was not acceptable.