Nokia tax tangle: No reprieve in sight

Finnish mobility devices company Nokia's tax muddle has deepened. The vendor is apparently running out of options whilst it's yet to embark on full-fledged legal recourse. Plagued with double whammy, Nokia has already sought intervention from the Ministry of Finance of Finland, but with reluctance from the Indian authorities, it all went in vain.

As soon as Nokia's plea was rejected by I-T appellate, the accounting regulator ICAI has sought details to probe alleged accounts and audit malpractice. The Indian authorities, as was in British telecom major Vodafone Rs 11,200 crore tax liability case, are in no mood to alter nitty-gritty, although reconciliation could however be a way forward to resolve such a vex issue.

The I-T auditors found prima facie default wherein Nokia is liable to pay 10 per cent (under TDS) on royalty payments against software shipments. The I-T commissioner appellate has already dismissed Nokia's appeal against Rs 2,080-crore demand notice since the onset of its Sriperumbudur (near Chennai) facility in 2006. The government is aggressively aiming at fiscal consolidation, and is not willing to give up.

Counsellor (Economic & Commercial) at Ministry for Foreign Affairs of Finland Juha Pyykkö has confirmed that upon an application by Nokia, the Ministry of Finance of Finland has approached the Ministry of Finance of India to launch the Mutual Agreement Procedure under the bilateral Double Taxation Avoidance Agreement between Finland and India.

Nokia spokesperson in a statement to CIOL, however said that the mutual agreement procedure under the India-Finland tax treaty has indeed been invoked. "Given the fact that the tax case remains open, the company looks forward to a prompt and just resolution to the matter," the statement added.

The devices major is expected to file a plea with the Delhi High Court, although it's unlikely to get any respite through legal intercession. This may, however, due to thorough audit by the tax authorities. Nokia has been accused of leveraging software to the tune of Rs 25,000 crore without tax liability for its burgeoning devices market in India.