Nokia India, Finnish parent discuss tax evasion in emails
The department had slapped a tax demand of Rs 2,080 crore on the company last year while re-opening the assessment for AY 2006-07 and 2007-08.
As Finnish phone-maker Nokia strives to meet the April 30 deadline for sealing the $7.2 billion deal with Microsoft, its tussle with the Indian tax department doesn’t seem to be heading towards conclusion anytime soon. The Income Tax department has found incriminating evidence pointing towards tax evasion by the company.
A senior official told The Indian Express that during the course of investigation, the department found clear evidence of tax evasion by the company in the “e-mails exchanged between Nokia India, Nokia Corporation and audit firm PwC”. The official said that the e-mails detailed and deliberated on the strategies to evade tax in India, adding that it was a planned act executed successfully by the company.
When contacted, a Nokia spokesperson refused to comment on the matter, saying “Nokia’s longstanding policy is not to comment on speculation in the media”.
“Normally from large multinationals we don’t expect such frauds and misinformation. During the survey of the Chennai facility under Section 133 A of the Income Tax Act, we found documents and e-mails discussing the tax evasions strategy,” the government official said.
The official added that Nokia India, in e-mails to its parent company, had discussed the manner in which billing should be done for payments for software. The two entities had agreed to make invoices in a way so as to escape tax net.
“Our investigation has found that the company in effect changed the nomenclature of the transactions. This was done by changing the headings in the invoices. For instance, payment for software was termed as that for raw material to escape the attention of the Indian tax authorities. The company improvised on the strategy, changing the name of the raw material from time to time. This was done to evade tax as software payments qualify as royalty and attract TDS,” the official said.
These e-mails pertained to years 2006-11, the official said, adding that the change in billing methodology may have an impact on transfer pricing.
Nokia and Indian tax authorities have been entangled in a tax dispute over violation of withholding tax norms while making royalty payments to its parent company in Finland since 2006.
The department had slapped a tax demand of Rs 2,080 crore on the company last year while re-opening the assessment for AY 2006-07 and 2007-08.
Later during the year, the department froze the assets of Chennai plant following the announcements of the deal with Microsoft, a development which was challenged by the company in the Delhi High Court.
Credit: The Indian Express
