HC asks Nokia to give simple undertaking, no escrow account deposit

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HC on Dec 12 allowed the plea of Nokia for lifting of a stay on transfer of its assets in India. AP HC on Dec 12 allowed the plea of Nokia for lifting of a stay on transfer of its assets in India. AP
SummaryHC on Dec 12 allowed the plea of Nokia for lifting of a stay on transfer of its assets in India.

The Delhi High court today declined the request of the Income Tax department to direct Nokia India to deposit Rs 3,500 crore in escrow account for any future tax demand and clarified that the company does not need to pay the sum immediately.

"We want a simple undertaking that you (Nokia India) have gone through the order and accept the condition (stated therein)," the court said to the company.

The I-T department had, in a fresh application, sought directions to the company for placing the Rs 3,500 crore in an escrow account preferably in India.

"...We have not accepted the request of Revenue for deposit of Rs 3,500 crore in their escrow account.

"The request is not in nature of clarification and is beyond the scope of the order (of December 12, 2013 paving way for sale of Finnish mobile firm to Microsoft subject to certain conditions)," a bench of justices Sanjiv Khanna and Sanjeev Sachdeva said.

The court also said Nokia India does not need to pay the amount immediately but as and when the demand is raised by the Income Tax department.

To a Nokia India's query, it said, "You will have to pay that amount if you fail to get a stay. Demand will be enforced only if there is no stay."

The Revenue department had in its application by way of a clarification demanded that the company should deposit Rs 3,500 crore in their escrow account for future tax demands.

To this the bench remarked, "Understand the consequences of your argument. If we accept what you are saying, if you take a microscopic view, Nokia India would be wound up."

On December 12, the high court had paved the way for the sale of Finnish mobile firm to Microsoft subject to certain conditions by defreezing its assets in India, specially the Chennai manufacturing plant. The conditions included that Nokia India will deposit a minimum of Rs 2,250 crore in an escrow account while its parent company Nokia Corporation(Corp) would be liable to pay the tax dues as applicable under the Income Tax Act up to maximum of Rs 3,500 crore.

Seeking modifications in the order, the I-T department, in its fresh application, had said "in the conditions imposed by the High Court ..., the situs of amount of Rs 3,500 crores and the realisation thereof is not stated/directed.

"It is requested, for the sake of clarity, to issue necessary directions for placing the aforesaid amount also in an escrow account preferably in India. The I-T department also very humbly seeks directions/clarification for payment of the said amount of Rs 3,500 crore as and when the demand is raised and is due for payment," the I-T department had said.

The court had on December 12 allowed the plea of Nokia for lifting of a stay on transfer of its assets in India. The firm had said that the injunction will jeopardise the sale of its Indian arm to Microsoft under a USD 7.2 billion global deal.

The I-T Department, which had rejected the offer of Nokia to pay a minimum deposit of Rs 2,250 crore to it, said Nokia India and Nokia Corporation owe it Rs 21,153 crore as total tax liability (existing and anticipated), including penalty during a seven-year period from 2006-2013.

The I-T department had also sought certain directions "pertaining to the mechanism for adjustment of refunds till the tax issues reach finality".

"Petitioners have yet to furnish the undertaking and guarantee bond in terms of the Court's directions dated 12.12.2013 and the Appellant/Respondents (IT department) reserve their right and seek liberty to give their comments /response/objections, if any, as and when the guarantee bond/undertaking is made available by the Petitioners (Nokia)," it had said.

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