Microsoft, Nokia deal: Delhi High Court order dials trouble for Nokia in India

Delhi High Court stays transfer of ownership rights for any of Nokia’s assets.

The India leg of Nokia?s global sale to Microsoft Corporation could run into trouble, with the IT department moving to prevent Nokia India from disposing of any properties and assets in the country and the Delhi High Court putting an interim stay on Nokia transferring ownership rights for any of its immovable assets.

The IT department has argued that the Finnish handset maker will not have sufficient assets with which to meet the anticipated tax liability of an estimated R3,997 crore, in addition to an existing demand of R654 crore after the company repatriated R3,500 crore of dividends to its parent company. It also paid R595 crore by way of dividend distribution tax on September 10, 2013.

The department?s notice to Nokia adds that the estimate of R3,997 crore does not include additions on the basis of transfer pricing adjustments, ?adverse findings in respect of which have also been noticed?. The amount could be higher, it says, once interest and penalties are levied.

The IT department has also asked Nokia for the value assigned to the India business of Nokia as part of the deal between Microsoft and Nokia Corporation.

Lawyers for Nokia India have informed the department that so far no agreement has been executed for transfer of the India business and no value has been ascribed for this either.

The Delhi High Court on Thursday passed an interim order asking Nokia not to ?surrender the leasehold rights or transfer the ownership rights in respect of any of its immovable assets?. The HC also barred Nokia from transferring the fixed assets to any third person. More important, the court has asked Nokia to inform the assessing officer ahead of repatriating any money overseas.

A day before that, on September 25, the additional commissioner of income tax, in its order of provisional attachment, under Section 281B of the IT Act, 1961, had said it was imperative to gather details of taxes deposited by Nokia to the tune of R595 crore on September 10, 2013, as dividend distribution tax.

The department order says that Nokia ?had declared huge dividend, which was to be distributed to M/s Nokia Corporation OY, Finland?. It says that Nokia had not declared a dividend in the two previous financial years and has highlighted the fact that while Nokia India?s balance sheet showed reserves of R6,220 crore at the end of March 2012, R4,095 crore has been paid out as dividends and taxes.

?At the same time, the assessee has current liabilities of R4,491.60 crore in the form of trade payable and other short term provisions and liabilities,? the department?s order says, adding that the possibility of the assets being even lower as on March 31, 2013, cannot be ruled out.

Get live Share Market updates and latest India News and business news on Financial Express. Download Financial Express App for latest business news.

First published on: 29-09-2013 at 03:55 IST