SC asks Nokia India to make proposal for settling tax row

The Supreme Court Monday asked Nokia India Pvt. Ltd. to make an offer to the Income Tax department for settling their tax row which has raised difficulties in the takeover of the mobile handset manufacturer's Chennai plant by Microsoft.

A bench of Anil R.Dave and Justice Shiva Kirti Singh asked the company to make the proposal to settle the tax issue, as it challenged the Delhi High Court order making parent company Nokia Finland jointly responsible for paying the taxes including penalties and interest as determined under the Income Tax Act.

Faulting the Dec 12, 2012 high court order, senior counsel Mukul Rohtagi, appearing for the company, told the court that the high court could not have added the name of Nokia Finland along with that of Nokia India as being jointly responsible for the discharge of tax liabilities being raised by the tax authorities.

Objecting to the first two conditions set out by the high court where Nokia Finland has been clubbed with Nokia India in the discharge of tax liabilities under section 201/201A, Rohtagi told the court that it had no problem with the high court asking it to deposit Rs.2,250 crore in an escrow account, the details of which would be furnished to the tax authorities within one month of the agreement with Microsoft/Microsoft International.

Rohtagi told the court that they are willing to deposit the money in the escrow account provided its deal with Microsoft was allowed to sail ahead.

He said otherwise it would shut the plant which has "perishable asserts" and then what would be left to recovered from the plant would be in the range of couple of hundred crores of rupees.

The court was told that the closing of the plant would have a direct bearing on its 8,000 employees and indirectly it would impact the livelihood of more than 25,000 people.

"What will happen if sale (of the Chennai plant) doesn't take place", Rohtagi told the court that "it (plant) is a perishable asset" and later it may not even fetch Rs.200 crore.

He wondered how the high court could make Nokia Finland responsible for discharging a tax liability which was beyond the jurisdiction of Indian tax authorities.

Saying that the notice by the tax authorities would take its course of litigation right up to the apex court, Rohtagi told the court that even though it was not obliged, yet Nokia Finland has undertaken to discharge the final amount that would eventually emerge.

However, Rohtagi's plea was opposed by Solicitor General Mohan Prasaran who said that high court had adversely commented on the conduct of Nokia in the dealing of the matter and that Nokia India had paid the dividends of Rs.3,500 crore to its parent company Nokia Finland.

Prasaran told the court that Nokia India has already transferred Rs.26,000 crore to its parent company ever since it was set up.

After issuing the tax notice, the Tax Authorities attached Nokia's assets in Chennai which has come in the way of Nokia-Microsoft deal taking its logical course.