Nokia India in more trouble after Jayalalithaa-led Tamil Nadu govt slaps Rs 2,400 crore tax demand notice

Written by ENS Economic Bureau | Chennai | Updated: Mar 23 2014, 00:51am hrs
NokiaIn yet another setback to Nokia, the Tamil Nadu govt has slapped on it a Rs 2,400 crore tax demand notice. Reuters
Finnish handset maker Nokias tax travails in India only seem to mount. Close on the heels of last weeks Supreme Court ruling that could force Nokia India to keep its Chennai phone factory out of its $7.2-billion deal with Microsoft at least till a pending tax row is settled, Jayalalithaa-led Tamil Nadu government's tax department has slapped a $414-million (close to Rs 2,500 crore) value-added tax (VAT) claim on the company.

Nokia has now filed a writ petition in the Madras High Court contesting the claims of the Tamil Nadu tax department, which has moved to assess tax on the export of devices from the companys Chennai facility.

The VAT department is said to have slapped the notice on Nokia pointing out that the mobile phone major did not comply with the export obligation of around 50 per cent for which it had claimed VAT exemption during the years FY10, FY11 and FY12.

The notice has stated that the company has to pay the tax for three years. Separately, Indias income tax department and Nokia India are embroiled in a tax row relating to alleged violation of withholding tax norms by Nokia India since 2006 while making royalty payments to its Finnish parent, which amount to R21,000 crore for 2006-2013, including penalties.

The Supreme Court recently upheld the Delhi High Courts December 12 order that said the handset maker cannot transfer its Chennai plant to Microsoft unless 16 conditions are met and also questioned Nokias claims on the valuation of the plant.

When contacted, Nokia said in an email statement, Nokia considers the claim to be without merit and counter to domestic tax laws. In India, exports are by law exempt from tax, and Nokia has proved consistently that devices produced at Chennai are exported abroad. Indeed, the company has been regularly assessed and audited by the tax authorities since 2006 without incident, and it has also won numerous export awards from governmental organisations.