Tax row: HC asks IT dept to decide on Nokia offer

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SummaryFirm ready to pay R2,250 cr against tax liability of R10,580 cr.

The Delhi High Court on Thursday asked the Income Tax Department to file its reply by Monday on Nokia India’s offer to deposit Rs 2,250 crore in an escrow account towards its tax liability, which, after adding interest and penalty, adds to almost Rs 10,580 crore. Nokia India had made this offer hoping that the tax department would lift the freeze on its Chennai factory, which it plans to transfer to Microsoft by December 12.

“You (I-T department) have to take a decision. Say yes or no. If it is acceptable say yes. If not, say no. Either way but you can’t say we will not decide,” a bench of justices Sanjiv Khanna and Sanjeev Sachdeva said.

Nokia had, last week, said that if the freeze was not lifted, the asset transfer to Microsoft could not take place by December 12. In that scenario, it would not be left with any option but to run the factory as a contract manufacturer. It had also said that in that event, it may even have to wind up its operations over the next 12 months.

On Thursday, in another application filed by the Additional Commissioner of Income Tax (ACIT) before the High Court, the tax department has urged that Nokia India’s proposal should be dismissed as the company is seeking relief from the court with “facts hidden behind

its back”.

Terming Nokia’s proposal to deposit Rs 2,250 crore in lieu of settlement of all its anticipated and existing tax demands as “wishful thinking”, the department has stated that the said amount is a “fantastic figure” for which no basis has been disclosed by the firm.

The department has stated that the handset manufacturer’s intention to avoid payment of “rightful” taxes is evident as it has neither disclosed its agreement with Microsoft to the tax authorities nor has it stated the entire sale price of the deal. This, the department claims, reflects “absolute lack of sincerity” of the applicant.

The ACIT has also raised concerns that the handset manufacturer has not addressed the issue of capital gains tax liability that will accrue to Nokia India on sale of its assets to Microsoft, adding that Microsoft’s decision to purchase Nokia India’s assets and not its equity shares is a “convenient coincidence” borne out of an “internal collusive agreement” between the two parties. fe

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