Nokia willing to pay Rs.2,250 cr as tax

Finnish mobile maker Nokia has moved the Delhi High Court, seeking lifting of stay on transfer of its assets here in an alleged tax evasion case, contending that the injunction will jeopardise the sale of its Indian arm to Microsoft under the $7.2-billion global deal.

The company submitted that once sale of its business to Microsoft is completed, it is willing to pay a minimum deposit of Rs.2,250 crore as tax, and the amount could be higher depending on the final sale price, but the counsel for the Income Tax Department informed the court that the tax liability of Nokia is nearly Rs.6,500 crore.

Nokia said if the sale of its Indian unit in Chennai did not happen, the company would wind up its operations here over a period of 12 months, and in itself the assets here would have little value.

Following this, a bench of justices Sanjiv Khanna and Sanjeev Sachdeva issued notice to the tax department, seeking its response by November 28 on Nokia’s interim plea for modification of its September 26 order by which Nokia has been restrained from selling or transferring its ownership rights in India relating to movable and immovable assets.

The high court also observed that “any successor would be bound to pay the tax liabilities of its predecessors as per statutory provisions.’’

“Immediately after sale, irrespective of the sale price, we will deposit Rs.2,250 crore. If the sale price is much higher, we will deposit the entire surplus after adjusting outstanding liabilities, excluding income tax liabilities,” Nokia’s counsel told the court.

The bench, while giving time to the Income Tax Department (IT) to respond to Nokia’s proposal, observed that it needs to see if its interim order, restraining Nokia from selling its assets, needs to be varied as the high court needs to protect the interests of all stakeholders.

In its plea, Nokia has said that it intends to sell its assets in the country as part of the sale of its entire global mobile phone manufacturing business to software giant Microsoft, but without the vacation of stay on sale of its assets the deal is not possible.

Nokia has also in its plea said that Microsoft is interested in purchasing Nokia India’s assets only if relevant approvals have been obtained from the appropriate authorities.

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

Commenting on the court order, a Nokia spokesperson said, “This is the latest step taken by the company as it seeks a fair resolution with tax officials over issues that first emerged in January, and Nokia is now pursuing this action as it prepares to sell substantially all of its Devices and Services business to Microsoft.”