Microsoft to face trouble taking over Nokia's India assets

The Delhi High Court has restrained Finnish mobile maker Nokia from selling or transferring its ownership rights in India relating to movable and immovable assets in an alleged tax evasion case.

A bench of justices Sanjiv Khanna and Sanjeev Sachdeva, while hearing a plea of Nokia India Pvt Ltd against the Income tax department's recent order attaching (freezing) its all 15 bank accounts, also asked the handset firm to inform the assessing officer two days in advance before repatriating any money abroad.

The bench also asked the company not to transfer dividend abroad without its permission.

"The petitioner (Nokia India) will not surrender the lease-hold rights or transfer the ownership rights in respect of any of the immovable asset transfer and the fixed asset to any third person. The petitioner will not transfer, sell or alienate movable plant or machinery located in the immovable properties mentioned in the... of the impugned order," the court said in a recent order.

"The petitioner before repatriating any money abroad will inform the assessing officer (AO) at least two working days in advance," the court said and gave liberty to the AO to approach it in case he finds the transfer of money "concerning or questionable".

In addition, the court said "no dividend will be transferred abroad without permission of the court till the next date of hearing" and posted the matter for November 12.

Granting minor relief to Nokia India, the court said "the petitioner will be entitled to receive debts-created receivables, loans and advances but the amount so received will be deposited in the bank accounts mention in Sub para...of the impugned order.

"The petitioner will be entitled to operate the bank accounts in normal course of business and will file monthly statement of bank accounts with the AO in hard copy as well as by sending details via e-mails," the court said.

The issue related to the Income Tax department's Rs 2,080 crore (Rs 20.8 billion) tax demand notice to the Finnish mobile firm.

The alleged tax evasion pertains to royalty payment made against supply of software by the company's parent company, which attracts a 10 per cent tax deduction under the Tax Deducted at Source (TDS)

category.

Appearing for the IT department, counsel Sanjeev Sabharwal told the bench that since June 21, 2013 the situation has changed as Nokia India has repatriated Rs 3,500 crore (Rs 35 billion) to its parent company as dividend.

The lawyer argued Nokia officials and its legal representative, at a meeting with IT officials, have failed to provide any detail of US-based software firm Microsoft's offer to acquire a significant part of Nokia's devices and system's business.

"Further, they could not furnish any declaration whether Microsoft Corporation would bear and pay unpaid and outstanding liability of Nokia India Ltd,” the counsel told the court.

Last month, Microsoft had said it will acquire Nokia's handset business for 5.44 billion euros ($7.17 billion) in cash.

Commenting on the court order, a Nokia spokesperson said "late last week, the Delhi High Court ruled in Nokia's favour in a case where the Indian tax authorities froze some of Nokia's assets for potential claims that hadn't even been raised against the company yet. Nokia welcomes this court decision."

Nokia is now working closely with the tax authorities to ensure that the parties will find a comprehensive solution to the remaining open issues and discussions have been constructive, the spokesperson said.

"Contrary to speculation in the media, Nokia has sufficient assets in India to meet its tax obligations, details of which will be shared with the tax authorities to allay any concerns they may have. Given that negotiations are ongoing, Nokia will not comment further on this matter," the spokesperson said.

"Nokia reiterates that it operates with transparency in its business transactions and is committed to resolving its outstanding issues with Indian tax authorities in accordance with all applicable laws, while also ready to defend ourselves vigorously as needed. This resolution to fulfil all our obligations is part of our firm commitment to be a good corporate citizen."