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Nokia’s tax liability reduced by 62%

The Tamil Nadu government has reduced its tax claim from Nokia India Pvt Ltd by 62 per cent – to Rs 912 crore from Rs 2,400 crore earlier – but imposed a penalty of Rs 624.01 crore on it, reveals a December 12 order reviewed by Business Standard.

Nokia refused to comment but senior counsel Arvind Datar, who is representing the company in the high court here, confirmed the development. Several calls made to representatives of the tax department were not responded to.

According to the department order in this regard, signed by the deputy commissioner (CT), enforcement (South), the tax claim for 2009-10 is Rs 266.37 crore, and penalty Rs 280.23 crore. For 2010-11, the tax claim is Rs 232.26 crore and penalty Rs 150.72 crore; and for 2011-12 the tax claim is Rs 413.17 crore and penalty Rs 193.06 crore.

Earlier, the department had alleged Nokia, once the world’s largest handset manufacturer, had been selling mobile phones meant for exports (manufactured at its facility near Chennai) in the domestic market, and enjoying tax benefits. For this, the company was slapped a Rs 2,400 crore value-added tax (VAT) notice.

Nokia had challenged this in the high court, saying the department’s claim was false, and had said it did not get a chance to contest the claim. Accepting this petition, the court had asked the department to hear the tax matter afresh and give the company an opportunity for personal hearing.

The company was, after this, given a personal hearing and the tax claim was reduced to Rs 912 crore on filing some documents, said an advocate who was directly involved in the matter.

Nokia had filed a writ against the new order and maintained that the department’s claims were not right, and said it did not claim VAT on exports.

Datar, in his earlier argument, had questioned the tax notice, asking how could export sales be treated as inter-state sales. He had noted that Nokia handset sales had brought foreign exchange to India; there were enough documents to support that products manufactured at Nokia’s Chennai facility, its largest, were sold in various parts of the world.

A spokesperson for Nokia had said at the time: “The tax department claims we did not export any mobile phone from India or Tamil Nadu between 2009 and 2011. Customs documentation shows the company exported more than 400 million handsets in that period. We were also granted several export awards over those years, to recognise our contribution to the Tamil Nadu economy by way of exports.”

The matter came up for hearing on Wednesday but the court postponed the hearing for a later date on advocates’ request.

Nokia’s mobile handset manufacturing facility at Sriperumbudur, near Chennai, had suspended operations from November 1 last year, and offered severance package to its workers. The facility had earlier been excluded from a deal between Nokia and Microsoft for acquisition of the former’s devices & services business by the latter, as the income-tax department at the Centre, which had served a Rs 21,000-crore tax notice on the company, had frozen the facility.


Jan : I-T dept surveys Nokia’s Chennai and Gurgaon premises
Feb: Nokia files letters of objection
May: ITAT asks Nokia to approach DGIT (I-T) for stay on demand
Jun: DGIT (I-T) directs I-T dept to offer an instalment plan and grant conditional stay; Nokia pays Rs 700 cr in instalments
Sep: I-T dept freezes Nokia’s assets and accounts; firm moves the Delhi HC, which unfreezes accounts but attachment of other fixed assets continues; $ 7.44-billion Nokia-Microsoft deal is announced
Dec: HC unfreezes assets and allows Nokia to sell the plant to Microsoft, on the condition that Nokia India will put Rs 2,250 cr or more in an escrow account; Nokia continues to pay the Rs 700 cr to be deposited in the escrow account; Nokia Finland gives a letter of guarantee for Rs 3,500 cr

Feb: Nokia moves the Supreme Court, seeking smooth transfer of assets and waiver of conditions
Mar: I-T officials move SC to stop transfer of the Chennai plant to Microsoft; SC dismisses Nokia’s appeal; the Tamil Nadu tax dept sends a Rs 2,400-cr sales tax notice; Nokia files writ petition against the dept’s claim
Apr: Employees offered voluntary retirement; around 700 contract workers avail of it; Nokia-Microsoft transaction is closed; the Tamil Nadu HC orders reinvestigation in the case, asks Nokia to pay 10% of the Rs 2,400-cr claim within 8 weeks
May: VRS scheme closes
Nov: Company suspends operations at Chennai factory


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