Nokia Corporation (ADR) (NYSE:NOK) India’s auditors, senior officials of multi-national audit firm PricewaterhouseCoopers, appeared today before the income tax department concerning the alleged tax default by the Finnish handset maker’s plant.
“They have come for interrogation. This is what I can say,” a senior income tax (investigation) official said.
Earlier this week, tax authorities summoned the officials from PricewaterhouseCoopers in connection to the tax default by Nokia Corporation (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V) India. “In the matter of the Nokia case, [the] I-T department has called us as they are seeking our inputs on this. We will extend full cooperation to them on this matter,” PricewaterhouseCoopers had said.
“We have seized financial documents and emails sent from PW&Co to Nokia, which reveals that tax evasion was conducted in a deliberate and planned manner in co-ordination with auditing officials from the firm,” said a senior official involved in the I-T probe.
I-T department in a survey conducted, on January 8th, at Finnish company’s Sriperumpudur factory, found ‘prima facie’ defaults in TDS deductions on royalty payments made by the plant to its parent company. As per an I-T official, Nokia is charged of making tax defaults amounting to Rs. 2,500 to Rs. 3,000 crore ($543 million).
K Baskaran, public relations officer for the chief commissioner of income tax department said, “It has been gathered that Nokia India has been making remittances to its Finnish parent, Nokia OYJ, as payments for software supplies since 2005. The above payments for software would attract TDS (tax deducted at source) as per the provisions of the I-T Act, 1961. But is the learnt that the assessee company has not made any TDS on the above software payments. In order to gather the relevant evidence on the issue, a survey has been organised.”
Adding: “Prima facie, there appears to be some defaults with respect to TDS deductions on royalty payments made to its parent company at Finland. It is also observed that the company has changed its accounting model and is in the process of re-organising its existing business to bypass certain direct and indirect tax liabilities.”
Nokia India in a statement said it is fully cooperating with the IT department. “Nokia is fully co-operating with the local tax authorities to ensure they get the necessary information to help in their inquiry,” stated the official statement.
As per the officials, Nokia Corporation (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V) India was supposed to pay Rs 16,000 crore as a royalty payment to its parent company after 10 percent tax deduction at the source. However, the tax officials claim that such transactions were reported in the audit report under procurement of ‘raw materials’, in order to evade tax payments for the last six years. The handset maker’s Indian arm, in last six years, paid around $5 billion as royalty.