I-T dept slaps fresh tax notice on Nokia India

The income tax department has issued a fresh tax demand to Nokia India on grounds similar to a previous claim but for different assessment years.

The latest demand is in addition to a ~2,080-crore tax claim in 2013 over Nokia India’s failure to withhold tax on payments made to its Finnish parent as royalty for software used in its mobile phones.

India and Finland are negotiating to resolve the claim under the mutual agreement procedure (MAP), a channel for resolving disputes involving double taxation.

Sources aware of the development said the tax department had made a fresh demand of nearly ~1,000 crore. The demand comes at a time when the government is trying to resolve pending tax cases to project India as an investment destination.

“Fresh tax notices have been served to Nokia India for the dispute relating to other assessment years, apart from the one being contested,” a finance ministry official told the Press

Trust of India.

“Nokia wants these notices to be included in ongoing discussions under the MAP. Officials from India and Finland will meet soon to decide on the course of action,” an official said.

Nokia’s handset manufacturing division globally was sold to Microsoft in 2014, but the Chennai plant was kept out of the $7.2-billion deal because of the tax dispute. The company confirmed receiving fresh tax notices but did not disclose the demand made.

Finance Minister Arun Jaitley had assured investors in Hong Kong last month the government would expeditiously resolve tax disputes.

Experts pointed out the latest tax demand would not affect investor sentiment because it was part of an ongoing dispute, but they added the tax department could have waited for the conclusion of the MAP proceedings.

“It could have ensured the continuity of the positive atmosphere created in the recent past for foreign investors,” said Rakesh Nangia, managing partner, Nangia and Co.

“If it is the same case as the earlier dispute then the government does not have an option till the case is resolved. This will not have much of an impact,” said Rahul Garg, leader, direct tax, PwC.