Nokia India Pvt Ltd, the Indian arm of Nokia Corporation (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V) today said Indian tax authorities have dismissed its appeal against an income tax bill of 20.8 billion rupees.
Commissioner Of IT Dismissed Nokia’s Appeal
The Commissioner of Income-Tax (Appeals) has dismissed the Finnish mobile phone maker’s appeal against the income tax demand notice for five fiscal years commencing 2006-07.
The new dismissal by the tax authorities is a jolt to Nokia Corporation’s series of problems in India. Earlier a new demand for service tax was slapped on Nokia India Pvt Ltd.
Commenting on the Commissioner’s dismissal of its appeal, Nokia Corporation (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V) India remarked it is disappointed and would evaluate all options including going to Delhi High Court.
Nokia Corporation (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V) said it reiterates its position that it is in full compliance with Indian laws as well as the bilaterally negotiated tax treaty between the Governments of India and Finland. Since its establishment of Chennai factory in 2006, the handset maker has been scrutinized by the authorities regularly and its policies have been validated by the Indian and Finnish tax authorities in the normal course of tax proceedings.
Tax Demand on Nokia
The tax demand was issued on Nokia Corporation (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V)’s India unit on March 15, for its alleged tax evasion on royalty payments made against supply of software by the company’s parent firm. The royalty payment attracts a mandatory 10 percent tax deduction at source.
The Income Tax department concluded that payments made by Nokia India to Nokia Finland for software downloads, that got embedded in the Nokia Corporation (BIT:NOK1V) handsets manufactured in India, were taxable in India as royalty.
In a statement, Nokia Corporation (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V) said the Ministry of Finance in Finland has launched the Mutual Agreement Procedure (MAP) with its Indian counterpart under the bilateral Double Taxation Avoidance Agreement to arrive at a common understanding on the matter.
MAP is a facility available to tax payers to resolve disputes giving rise to double taxation and normally most of the cases under MAP would get resolved. MAP is expected to eliminate protracted legislation.
During the past few months, Indian tax authorities have been slapping tax claims on prominent global players such as Vodafone Group Plc (LON:VOD) , Royal Dutch Shell (LON:RDSB), Mondelez International Inc’s (NASDAQ: MDLZ) Cadbury Unit besides several other auto makers for their alleged under pricing transactions ranging from share transfers to sale of vehicles.
India plays a crucial role for Nokia Corporation (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V)’s attempt to maintain its global market share against competitors like Samsung and Apple. Nokia Corporation (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V)’s Asha series of phones are meant to address the needs of consumers bordering between high-end feature phones and smart phones.
