Income Tax Dept conducts verification at Nokia's factory

Verification was to look into computers used to download software from Nokia's parent co in Finland, will strengthen dept's case against Nokia

Income Tax Department officials today went for a “verification” to Nokia's factory at Sriperumbudur, near Chennai, along with Central Forensic Science Labs officials from Hyderabad.

The verification was to look into the computer systems that were used to download the software from Nokia's parent in Finland and this will strengthen the Department's case against Nokia, said a senior official from the Department.

Responding today's verification Nokia's spokesperson responded saying “Nokia is fully cooperating with the Indian Tax authorities. We are duly responding to all queries raised by them and extending our full support in completing the investigation.

Being a good corporate citizen is firm and unwavering, we always observe applicable laws and rulings in the countries where we operate. Since we arrived in India 17 years ago, we have honored all local laws and paid all taxes legally due. We look forward to resolving this issue quickly and fairly with the support of the Indian government.”

Meanwhile, today's developments comes a week after the Department in Chennai submitted its interim report to its Delhi headquarters. In the report it was alleged that mobile handset maker evaded TDS to the tune of around Rs 3,000 crore and violated Transfer Pricing Regulation, which could be another around Rs 10,000 crore.

The official, who is also part of the investigation team said that verification started at 11:30 am on Thursday and around 10-15 officials from the IT department along with two experts from the Central Forensic Science Labs were part of the verification, which lasted for almost seven hours.

The Department has sought the help of Central Forensic Science Labs to look in to the computer systems at the factory that were used to download the software. “This will strengthen the Department's case against Nokia,” said the Official.

He added, during recording of statements in the last few weeks, Nokia officials gave different versions. The department sought a third party cyber expert to prove what Nokia did was wrong, and to strengthen the case, if it goes to a Court.

The official added, a senior level officers from the Department's headquarters in New Delhi will be coming to Chennai on Monday and will be stationed here for two days.

“They want to have better understanding on the case and on the report which was sent by us,” said the official, who dont want to be identified.

He added, the Department is expected to raise demand anytime with Nokia for Rs 3,000 crore (TDS) and if they don't compile with the law we may look at freezing their Bank accounts and their assets.

It may be noted, on January 30, 2013, the Department submitted a 150 page interim report to its headquarters in New Delhi in which it was alleged that Nokia did not deduct any tax and company has violated transfer pricing guidelines.

While, TDS evasion is around Rs 3000 crore, Transfer Pricing Violation could be to the tune of around Rs 10,000 crore said the official.

He added, the Department would collect Rs 3,000 crore on account of TDS violation by February end or March first week. Nokia has misrepresented accounts, he added.

According to the Department, the Indian subsidiary of Finland-based handset manufacturer Nokia, has been downloading software from its parent company to manufacture mobile handsets at Sriperumbudur, near Chennai, but had not paid tax on royalty for downloading.

In 2006, Nokia set up the facility at Sriperumbudur, which is country’s first telecom SEZ and has been amongst the top exporters from India.

Over the years, Nokia has invested over $330 million in scaling local manufacturing operations and capability. The plant holds the distinction of being not only Nokia’s largest handset manufacturing facility but also the largest handset manufacturing facility across all vendors anywhere in the world.