The Income Tax (IT) Department told the Delhi High Court that Nokia’s offer to pay a minimum deposit of Rs 2,250 crore out of the company’s total tax liability of nearly Rs 6,500 crore, is not acceptable, reports Economic Times. The company had earlier approached Delhi High Court seeking a lift on the stay order regarding the ownership transfer of its immovable assets in the country by December 12, 2013.
Nokia India’s lawyer said that it was not in a position to offer more and added that it is exiting the mobile manufacturing business, globally, irrespective of whether its plant in India is sold.
Nokia said lifting of this asset freeze will allow the company to successfully transfer all its Indian factory assets to Microsoft by Q1 2014 (when the Microsoft-Nokia agreement is expected to close), failing which the Indian factory assets will not be transferred to Microsoft and it will create an uncertainty at its Chennai facility. Citing sources close to the company, Reuters had reported that Nokia will probably be operating the plant as a contract manufacturer for Microsoft.
A bench comprising justices Sanjiv Khanna and Sanjeev Sachdeva pointed out that Nokia had earlier said it will continue manufacturing mobiles here and has now changed its stand. The bench asked Nokia to give details of its assets and liabilities as well as how much tax it has paid here, during the next hearing on December 9. The bench also questioned Nokia India’s intention behind sending Rs 3,500 crore to its parent company as dividend of 18 years and asked why the amount should not be brought back here.
The Delhi High Court had earlier put an interim stay on the ownership transfer of Nokia India’s immovable assets and also forbidden them from transferring these assets to any third person. This was due to IT Department’s claims that if Nokia transfers its ownership rights to others, the company will not have enough assets to meet the estimated tax liability of Rs 3,997 crore along with the existing tax demand of Rs 654 crore. In a statement, Nokia however had claimed to have sufficient assets in India to meet its tax obligations, details of which were expected to be shared with the tax authorities.
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 last month and had received an interim stay order. However, the company had 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 a 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.