Tell us how much your Chennai plant is worth, Supreme Court orders Nokia

Written by fe Bureau | New Delhi | Updated: Mar 15 2014, 18:31pm hrs
Nokia Chennai plantI-T dept had moved the Supreme Court seeking a direction to stop the transfer of Nokia?s Chennai plant assets to Microsoft pending resolution of a tax dispute.
THE Supreme Court on Thursday asked Nokia India to furnish the valuation report in relation to its Chennai plant by Friday, the transfer of which is integral to the handset makers $7.2-billion deal with Microsoft announced in September 2013.

A bench headed by justice AR Dave came down heavily on Nokia India for not being forthcoming about the market value of the assets of its Chennai plant. On Wednesday, the income tax department had moved the apex court seeking a direction to stop the transfer of Nokias Chennai plant assets to Microsoft pending resolution of a tax dispute. The department argued that the company was being evasive about its valuation of the plant. The tax claims which relate to alleged violation of withholding tax norms by Nokia India since 2006 while making royalty payments to its Finnish parent, amounted to R21,000 crore for 2006-2013, including penalties.

The apex court said on Thursday: It must be in the files of your company. Must be. Dont take us for a ride. Give us the valuation report by tomorrow, the court shot back when Nokia India counsel Vikas Srivastava said that no such valuation had been ascertained till now but quoted a rough estimation of R2,200 crore to R3,000 crore.

Observing that it would try to help both sides to find a reasonable solution to sort out the row, the court said closing down of Nokia India plant when its parent was globally transferring and disposing of its business might not be in the interests of the I-T department or the 8,000 employees at the plant. By sending you (Nokia officials) to jail, the government will not get anything, the judge said. Dave said if the deal doesnt get through soon, the value of the company will decline sharply and tangible assets on same may not fetch much price. Around 50% of Nokia handsets are manufactured in India.

Srivastava argued that Nokia will receive around R30,000 crore from its global transfer of mobile phone business to Microsoft, (which) is the best buyer and if anyone is willing to give a better price (Chennai plant), they are welcome to buy it.

Srivastava said: 98% of the global deal is over, but the deal with regard to the India operation is only 9% complete and is lagging behind. He argued that the government was welcome to sell the company at a better price than his estimation of R2,200 crore.

Stating that Nokia Finland has expressed its inability to furnish any letter of guarantee in respect of tax demand which may be determined in future, the counsel said that Nokia India is willing to give bank guarantee for R2,250 crore in respect of tax demand.

Senior counsel RP Bhatt, appearing for the I-T department, argued that despite the court asking for a 'concrete proposal' last week to sort out the issue, Nokia India had been evasive. The company, he said, has been dishonest and has been trying to scare the government by threatening to abandon the Indian operations. Bhatt told the bench that Nokia India had repatriated the dividend amount of R3,500 crore to Nokia Corporation, Finland in August 2013 under fraudulent circumstances, apart from more than R15,000 crore towards software purchases. It has also remitted R58,000 crore to its associated enterprises towards raw materials.

The department had earlier frozen Nokia Indias movable and immovable assets in September after an almost R3,000 crore tax demand was disputed by the company. A day later, the handset maker was able to unfreeze its bank accounts after approaching the Delhi HC.