It seems the tax troubles for Nokia are not going to end so easily. Recently, Tamil Nadu tax authority alleged Nokia of tax evasion, slapping Rs 2,400 crore sales tax notice on the company.
As per the law, products exported from Special Economic Zone are eligible for tax exemption but the products sold domestically are subjected to taxation. Nokia has maintained that it has consistently been exporting the devices manufactured at Nokia’s Chennai plant and thus there are no tax obligations. But the tax authority is claiming, as firmly, that the devices were instead being sold domestically.
The spokesperson for Nokia quoted, “Indeed, the company has been regularly assessed and audited by the tax authorities since 2006 without incident, and it has also won numerous export awards from governmental organisations”. The spokesperson further added, “As with all tax discussions in India, Nokia will cooperate with the authorities and, where necessary, defend itself vigorously.”
The company has knocked the doors of Madras High Court making a petition against the allegations made by Tamil Nadu government. It has rebutted the allegations claiming that devices were being exported and not sold on domestic markets as claimed by the tax authorities.
This notice is going to add to the past tax obligation due on Nokia. Earlier this year, I-T department sent 21,000 crore tax notice for transfer pricing violations related to financial transactions, the company made with the parent company in Finland. Nokia was recently acquired by Microsoft and as per the acquisition agreement, Nokia was supposed to transfer its assets including the Chennai manufacturing plant by the end of the March, 2014. To make the matters worse, tax authorities issued a freezing order restraining them from doing so. The company is still waiting to get a green flag from Supreme Court on transferring its Chennai plant to the US based software giant.
In the latest turn of events regarding the 2,400 sales tax notice, the central government has asked tax authorities to appoint a 3rd party auditor to run a special audit into Nokia India accounts.