New Delhi, June 5 (): Nokia India Corp faces a problem with the income tax after the commissioner of income tax (appeals) rejected the appeal against Rs.2, 000 crore tax demand in a case. Tax authorities claim that Nokia has not paid royalties on software downloaded on devices manufactured at the Chennai plant. Nokia is the second major in telecom sector after Vodafone to face tax issues. The Union Cabinet is meeting to review the Vodafone tax issue.
The decision is likely to set off a series of litigation at different courts challenging the tax demand. Nokia has already indicated that it would start afresh the case in Delhi High Court. In March after a search by IT men at the Chennai plant and offices, it was served a notice to pay Rs2000 crore as tax for the royalties it paid from Indian operations of the parent body in Finland. Nokia claims that under the trade agreement with Finland, it does not have to pay tax. From 2007 onwards it has been involved in various tax defaults. The latest charge is that it should have paid 10% TDS on the money paid as royalty.
Nokia which moved the Delhi High Court was asked to seek the finance Ministry help over the bilateral agreement to avoid double taxation between the two countries and to appeal with the Commissioner of Income tax (appeals) and arrive at a mutually acceptable solution. There is a mutual agreement procedure (MAP) system that Finland has with India. India will not see the money in near future as the phone maker will go to an appellate tribunal and High courts and go the MAP where reps from both countries have to resolve the issue. Nokia has a profitable operations in India. The rival Samsung is making fast advances and has overtaken in volumes. The new models launched by the Finnish company in budget class has managed to once again get back into race.