India, Finland to discuss Nokia tax case next week

Will also review the double taxation avoidance treaty

Finance Ministry officials of India and Finland will meet next week to discuss the Nokia’s Rs.6,500-crore tax dispute case and review the double taxation avoidance treaty.

“Two officials from Indian Finance Ministry and two officials from Finland’s Finance Ministry will meet next week in Delhi and review the India-Finland tax treaty and discuss the Nokia tax case,” a top Finnish government official told PTI.

Nokia and the Indian Income Tax Department are fighting out a tax dispute case in the Delhi High Court. While Nokia has offered to pay a minimum deposit of Rs.2,250 crore, out of the total tax liability of nearly Rs.6,500 crore, the I-T Department has told the court that the offer is not acceptable.

Nokia had moved the Delhi High Court, seeking lifting of stay on transfer of its assets here and offered to pay a minimum deposit of Rs.2,250 crore as tax, contending that the injunction will jeopardise the sale of its Indian arm to U.S.- based tech giant Microsoft under the global deal.

The matter has been listed for December 9 when Nokia has to give details of its assets and liabilities as well as how much tax it has paid here.

Chennai plant

The Chennai plant of Nokia is one of its biggest facilities.

It may be excluded from the $7.2 billion agreement between Nokia and Microsoft if the company’s assets are not released by December 12.

Finland’s Foreign Minister Erkki Tuomioja had last week said that failure to resolve the Nokia tax case before December 12 could lead to closing down of the Chennai plant, which directly and indirectly employs 30,000 people in India.

The Income Tax Department had slapped a notice on Nokia’s Indian subsidiary for violating withholding tax norms since 2006 while making royalty payments to its parent company in Finland.

Meanwhile, the Income Tax Department has calculated and arrived at a total demand of over Rs.10,000 crore. It might raise two separate demands to the tune of Rs.4,560 crore and Rs.6,008, respectively, on Nokia Corporation and Nokia India, official sources said.

Asked for its comments, the company said “we have not been served with any official claim, so we cannot comment on this.”

The company said, “We want to stress that our main focus right now is to remove the freeze on our Indian assets, including Chennai, before the deadline of December 12. This is a separate matter from the broader tax dispute.

“In recent months we have seen and read about many claims from the tax authorities. We feel they are without merit and will defend ourselves vigorously in court.”

The Department has referred to the newly-calculated figures in documents before the Delhi High Court.

The new calculation is based on the penalty component on non-payment of taxes due under ‘copyright’ related businesses of the firm and is ‘over and above’ the original calculated amount.

New demand The new demand, according to the documents, pertains to seven assessment years from 2006-07 to 20012-13.