The tax department on Monday told the Delhi High Court that under the India-Finland double taxation avoidance agreement (DTAA) it can only seek assistance from Finnish authorities for recovery of Nokia India’s (NIPL) tax liability and cannot compel recovery of its demands.
The department’s submission came after the High Court raised a query on the options available to the department to secure its liabilities, in case NIPL refuses to pay.
For now, Nokia Corp and NIPL are facing an existing and anticipated tax liability, amounting to Rs 21,153 crore in respect of payments of royalty made by the Indian firm to its foreign parents.
The demands raised against the two entities are inclusive of interest and penalties on NIPL’s multiple transactions with Nokia Corp and have been made by the Director General of International Taxation (DGIT) and the Chief Commission of Income Tax (CCIT).
After a brief hearing, the HC posted the matter for Tuesday as senior counsel Harish Salve, appearing on behalf of NIPL, was not present. However, before deferring the matter, the court sought information from NIPL on its business operations in India.
Primary among the information sought by the HC is NIPL’s investments in India, the dividends paid by the company to its foreign parent, expenditure incurred by the firm for purchase of raw materials and the payment transactions on which the entire dispute has arisen.
The court also raised a query on whether Nokia Corp would continue to exist post the global Microsoft- Nokia deal, so as to secure the tax liabilities raised by the taxman.
Earlier on December 2, tax authorities had told the court that NIPL’s offer to deposit Rs 2,250 crore in an escrow account as a measure to secure the liability raised by the DGIT and CCIT was not acceptable to it.
The Indian firm had made this offer hoping that the taxman would lift the freeze on its Chennai factory, which it plans to transfer to Microsoft by December 12.
NIPL had earlier proposed that it was willing to deposit the entire sale proceeds of the global deal in a bank account, which will be subject to the demands made by the department.
Currently, negotiations are on between the department and NIPL’s officials and the I-T department is expected to state its stand on the handset manufacturer’s proposal on Tuesday.
Will look for a buyer for Chennai unit: Nokia
New Delhi, Dec 9: Finnish handset maker Nokia on Monday said it will have to look for another buyer for its Chennai manufacturing unit if it cannot transfer the plant to Microsoft due to the tax row with the government. Microsoft had in September agreed to acquire Nokia’s devices and services business for $7.2 billion. The Chennai unit, which employs about 8,000 persons, was part of the deal.
However, the unit may have to be segregated if the tax row is not settled before December 12 and Nokia may then look at providing contract manufacturing services to the US-based company for about a year, a senior Nokia official said. PTI