India, Finland officials discuss Nokia tax case

Indian and Finnish finance ministry officials on Tuesday discussed Nokia's Rs 21,153 crore (Rs 211.53 billion) tax dispute case and reviewed the double taxation avoidance agreement.

"Finnish finance ministry officials met Indian finance ministry officials on Nokia case today. The meeting was inconclusive, both sides presented their views. Both sides also reviewed India-Finland DTAA," a senior finance ministry official said.

Nokia and the Indian Income Tax department are fighting out a tax dispute case in Delhi High Court. While Nokia has offered to pay a minimum deposit of Rs 2,250 crore (Rs 22.50 billion), out of the total tax liability of nearly Rs 21,153 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 a stay on transfer of its assets here and offered to pay a minimum deposit of Rs 2,250 crore (Rs 22.50 billion) as tax, contending that the injunction will jeopardise the sale of its Indian arm to US-based tech giant Microsoft under a global deal.

In September, Microsoft Corporation and Nokia Corporation announced that their boards have decided to enter into a transaction whereby Microsoft will purchase substantially all of Nokia's Devices & Services business, license Nokia's patents, and license and use Nokia's mapping services.

On Monday, the Income Tax department has informed the Delhi High Court that Nokia India and Nokia Corporation owe it Rs 21,153 crore as total tax liability (existing and anticipated), including penalty during a seven-year period from 2006-2013.

The amount payable by Nokia has been arrived at by the I-T department on the basis that the mobile manufacturing firm does not discharge its TDS liability on royalty payments and is not entitled to any deduction under tax laws for operating from a special economic zone (SEZ).

The submission has been made by the I-T department in its reply to Nokia's plea for unfreezing of its assets in India prior to its $7.2 billion deal with Microsoft.

Nokia's Chennai plant 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 recently said that failure to resolve 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 I-T 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.