March 28, 2013 / 9:50 AM / 7 years ago

Nokia India unit gets $383 million tax demand; court stays order

MUMBAI/HELSINKI (Reuters) - Nokia’s India unit has been served with an income tax demand of about 20.8 billion rupees ($383 million) for five fiscal years starting from 2006/07, according to a March 22 notice on an Indian court’s website, in one of several tax disputes involving a foreign company.

Nokia said on Thursday that Indian tax officials had issued the Finnish mobile phone maker an order and that the Delhi High Court had issued a stay on the demand. Nokia did not specify the amount in the order.

The tax demand comes as Asia’s third-largest economy is aggressively pursuing tax claims against foreign companies as it seeks to rein in its budget deficit to avoid a credit rating downgrade.

Last month, a government official said tax authorities have accused Cadbury Plc, now part of U.S. snacks firm Mondelez International Inc, of misleading them about production from a new factory to avoid about $46 million in taxes.

Royal Dutch Shell, Vodafone Plc and LG Electronics Inc are among numerous multinational firms involved in tax disputes in India, and have challenged the orders.

In Nokia’s case, the tax demand was issued on March 15 and the Finnish company received the order last week, the court document said. The court has asked the tax department to file its “counter-affidavit” in this case within one week.

“Nokia reiterates its position is that it is in full compliance with local laws as well as the bilaterally negotiated tax treaty between the governments of India and Finland and will defend itself vigorously,” the company said in a statement.

The lawyer for Nokia India assured the court that the company would not transfer or remit any funds outside India, except in the normal course of business, until the date of the next court hearing, the court document showed.

The Nokia lawyer told the court that the phone maker had no intention to evade any taxes in India, but would seek legal recourse to challenge the notice of tax demand.

Countries like India are crucial for Nokia’s attempt to hold on to global market share. Last month, it announced an expansion of its Asha line of low-end smartphones and India is widely seen as a key market for such cheaper models.

The company last month objected to tax officials entering its factory in Chennai in southern India, which is one of its biggest facilities. Nokia said it has invested over $330 million in Chennai since setting up the factory in 2006.

Reporting by Sumeet Chatterjee and Ritsuko Ando

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