Nokia Loses Supreme Court Fight Over Indian Tax Dispute
Published on: 15th Mar 2014
By: Ian Mansfield
India's Supreme Court has dismissed Nokia's appeal against a lower court ruling requiring it to provide a bank guarantee covering the potential liabilities in a USD635 million tax dispute.
Nokia is fighting a tax demand over the import of software for installation in the mobile phones assembled in the country. It accuses the government of violating a bilateral tax treaty between India and Finland that is supposed to prevent double-taxation issues of this sort.
Nokia has already been asked to deposit Rs 2,250 crore (USD367 million) into an escrow account to release its Chennai handset factory in order to include it in the handset sale to Microsoft.
Delhi's High Court has since agreed to release Nokia Indian bank accounts, but its immovable assets, including its buildings and facilities in India, remain frozen by the authorities.
Nokia has now been ordered to provide a Rs 3,500-crore guarantee for the rest of the tax demand as well before the assets will be released.
"The decision means that the case now reverts to the February 5 Delhi High Court ruling on the asset transfer," Nokia said in a statement.
Nokia still denies that the tax on software transfers is payable, as there is a dual-taxation avoidance treaty with Finland to prevent the software being taxed in both countries.
The tax dispute could reach as high as USD3.4 billion when all the possible penalties and interest payments are included.