IT Department set to slap fresh demand notices on Nokia

‘The estimated fresh tax liability on the firm can be about Rs.1,000 crore’

In more trouble for Finnish mobile firm Nokia, whose immovable assets were attached in an alleged tax evasion case recently, the Income-tax Department is set to issue fresh demand notices for payment of taxes to the tune of Rs.1,000 crore.

The Department, according to sources, has also “prioritised” the tax demand notices on the firm pertaining to assessment years 2011-12 and 2012-13 so that the “interest of the revenue” is not jeopardised against the backdrop of the current tax litigation with the company and the proposed acquisition of the mobile phone maker by U.S. giant Microsoft.

Sources privy to the tax case of Nokia said the firm’s assets were frozen not only for the purpose of obtaining revenue with regard to the earlier demand of Rs.2,080 crore, but also in connection with the forthcoming demand notices, which could be issued “as soon as assessment proceedings finish within 2013.” “The estimated fresh tax liability on the firm could be about Rs.1,000 crore, and the IT procedures will be followed in this regard,” the sources said.

“Nokia operates with transparency in its business transactions, and is committed to resolving the outstanding issues with Indian tax authorities in accordance with all applicable laws. We are, however, also ready to defend ourselves vigorously as needed,” a statement from the official spokesperson of the company said.

The IT Department, sources said, had fast-tracked the case as it involved a huge tax amount and because last time, the firm moved dividend funds without informing the tax authorities in the competent range in Chennai. The Department was taking no chances, they said.

Restraint

The Delhi High Court recently restrained Nokia from selling or transferring its ownership rights in India relating to movable and immovable assets in the alleged tax evasion case.

A bench of justices Sanjiv Khanna and Sanjeev Sachdeva, while hearing a plea of Nokia India Pvt. Ltd. against the Income-tax Department’s recent order attaching (freezing) all its 15 bank accounts, also asked the handset firm to inform the assessing officer two days in advance before repatriating any money abroad.

The bench also asked the company not to transfer dividend abroad without its permission.

The court, however, granted minor relief to Nokia, saying it “will be entitled to receive debt-created receivables, loans and advances but the amount so received will be deposited in the bank accounts mentioned in sub para...of the impugned order.”

The alleged tax evasion pertains to royalty payment made against supply of software by the company’s parent, which attracts a 10 per cent levy under the tax deducted at source (TDS) category.