The Telegraph
Saturday , March 22 , 2014
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Fresh tax claim stumps Nokia

Calcutta, March 21: In a fresh salvo fired at Nokia, the Tamil Nadu sales tax commissioner has slapped a Rs 2,400-crore demand notice on the Finnish handset maker, alleging that phones manufactured in the company’s SEZ facility in Chennai were not exported but were instead sold in India.

The development comes at a time when Nokia is already in the midst of a Rs 21,000-crore tax row with the income tax department that threatens to block the transfer of its local assets to Microsoft as part of a global deal.

Nokia today filed a writ petition in the Madras high court contesting the new tax notice served two weeks back and said it would defend itself vigorously in this matter.

Brushing aside the allegations of the Tamil Nadu government, Nokia termed the move “absurd”, completely without merit and counter to domestic tax laws.

“In India, exports are by law exempt from tax, and Nokia has proved consistently that devices produced at Chennai are exported abroad. The company has been regularly assessed and audited by the tax authorities since 2006 and it has also won numerous export awards from government organisations,” Nokia said in a statement.

The state government has claimed that for the three years, between 2009 and 2012, the phone maker had sold all the handsets manufactured at Chennai within India instead of exporting 50 per cent of it as decided under an agreement.

In response, Nokia said: “It is absurd that the Tamil Nadu tax authority is now claiming that devices made in Chennai were not exported and were instead sold in India. We contend that this allegation has no basis in reality; it could easily be rebuffed by a check of documentation provided to various government departments, including customs.”

Nokia said it had records to prove that the export target had been met every year. It also referred to a mention of this point in its affidavit before the Supreme Court in the dispute with the income tax authorities.

Nokia’s facility in Sriperumbudur was set up in 2006 and has manufactured 800 million devices till March 2013.

Sources claim that if the company had been selling devices in the domestic market, it was well within law in doing so.

Last week, the Supreme Court had ordered Nokia to make arrangements for a Rs 3,500-crore guarantee before transferring its plant in Chennai to Microsoft.

It had earlier dismissed Nokia’s plea against a Delhi high court order directing its parent in Finland to provide an undertaking to fulfil the conditions relating to payment of tax dues.

Incidentally, the agenda for the 50th meeting of the Board of Approval of SEZ, held on January 24, 2012, mentioned a submission by Nokia that it had invested over Rs 1,300 crore in India and exported over 60 per cent of its production to various countries from the Chennai plant.

Nokia had submitted that with the change in business model, a further investment of Rs 250 crore in its India operations, especially the manufacturing facility, was expected by 2014. It also has plans to create 500 additional jobs.

The agenda also mentioned that Nokia was carrying out a restructuring of its business model, whereby all sales of mobile phones into India domestic tariff area were to be made by a new SEZ unit named Nokia India Sales Private Limited (NISPL).

The original manufacturing entity in the SEZ, Nokia India Private Ltd, would exclusively make handsets and sell them to Nokia Corporation, which would then invoice the supplies to NISPL. The new trading company would then carry out sales and distribution in the local markets.

The new entity is also part of the Nokia group and is a subsidiary of Nokia Corporation, Finland, but is a distinct legal entity.