AI Drafter 
TaxTMI 
TaxTMI 
2013 (12) TMI 613
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....er records that in the interest of Revenue, the following assets, properties and bank accounts of Nokia India stand provisionally attached: "2.6 In view of the above, I am of the considered opinion that for the purpose of protecting the interests of revenue, it is necessary to attach provisionally u/s 281B of the Income Tax Act, 1961 the following assets/properties/bank accounts of the assessee company, for which prior approval has been accorded by the Commissioner of Income Tax, Delhi-V, New Delhi vide letter F. No. UT/Delhi-V/2013-14/1390 dated 24.09.2013:- A. All book debts including Trade Receivables, Short Term Loans & Advances and Long Term Loans & Advances appearing in the books of accounts of the assessee company as on date. B. Ownership/Leasehold rights in respect of the following immoveable properties including land and building to the extent of the interest of the assessee company in the property :- (i) No. A-1, Nokia Telecom SEZ, S1PCOT Industrial Park, Sriperambudur, Chennai, Tamilnadu - 600 001. (ii) No.4, Nokia Telecom SEZ, Phase-3, National Highway No. 4, Sriperambudur, Chennai, Tamilnadu 600 001. (iii) 392/1, Green Gardens, Anna Nagar East, Chenna....
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.... Estimated Additions to Returned Income Estimated Demand (in Rs. crores) Major Issues on which additions are anticipated on account of Survey 1 2006-07 15.15 5.00 Disallowance u/s 40(a)(i) of the Act is anticipated on account of non-deduction of TDS u/s 195 on royalty payments for software licensing representing the payee's income deemed to accrue/ arise in India u/s 9(1)(vi) of the Act, being projected as raw material purchased by the assessee company. 2 2007-08 1484.30 499.00 3 2009-10 2336.51 786.00 4 2010-11 2770.59 933.00 5 2011-12 3693.90 1243.00 6 2012-13 1577.33 531.00 Total Demand 3997.00 The above mentioned estimated additions do not include additions on the basis of transfer pricing adjustments, adverse findings in respect of which have also been noticed during the course of survey u/s 133A as referred to above. Besides, the quantum of demand will increase further once the interest u/s 234A/B/C of the Income Tax Act and penalty as applicable is also levied in the case of the assessee company. 2.3 Position of assets of the assessee company as on 31.03.2012 is a....
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....nths on 15th March, 2013, orders were passed in respect of financial years 2006-07 to 2011-12 raising a total demand of Rs.1912 crores. Demands in respect of financial year 2006-07, 2010-11 and 2011-12 were sought to be enforced by curtailing the period of 30 days under Section 156 of the Act, to 5 days. It appears that similar attempt was made in respect of financial year 2009-10. These orders were made subject matter of challenge before the High Court in several writ petitions including WP(C) No. 2004/2013. By interim order, dated 22nd March, 2013, relying upon the decision of this court in Sony India Ltd. vs. Commissioner of Income tax (2005) 276 ITR 278 (Del.), the respondents were restrained from taking coercive measures, for recovery of demand. The court also recorded statement on behalf of Nokia India, on instructions, that they would refrain from transferring or remitting anything out of India except in the normal course of business till the next date of hearing. These writ petitions were disposed of, vide order dated 17th April, 2013 with the direction that the demands shall be enforced after the normal period of 30 days. 8. Subsequently, another set of writ petitions i....
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....Nokia India asserted that they had no intention or desire to close their operations in India. Referring to future projected demand under Section 40(a)(i), it was submitted that it would be duplication. Keeping in view and recording the aforesaid facts, the following interim directions were issued: "11. Noticing the fact that the petitioner is an operating and a running company, we pass the following interim order till the next date of hearing: (1) The petitioner will not surrender the lease hold rights or transfer the ownership rights in respect of any of the immovable asset or transfer the fixed asset to any third person. (2) 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 D of para 2.6 of the impugned order. (3) The petitioner will not transfer, sell or alienate movable plant or machinery located in the immovable properties mentioned in Clause B of para 2.6 of the impugned order. (4) 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 assessing o....
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....rnational has decided not to purchase equity shares of Nokia India held by Nokia Finland and has concluded first and second amendment in form of Stock and Asset Purchase Agreement dated 14th November, 2013. It is highlighted that Microsoft International has made it clear that it is only interested in purchasing assets etc. provided approvals are granted by the relevant authorities and they are also aware of the liens etc., on the assets. It has been agreed that in case necessary approvals are not received, Microsoft International shall not purchase the Indian assets. Paragraphs 6(f) to (i) of the application, read:- "f. It has been clearly understood that in case the purchase of Indian assets does not go through, Microsoft International would have to reallocate production volumes of phones to other manufacturing facilities (outside India, to jurisdictions where it would as a consequence of the transaction have its own manufacturing facilities) and this will be achieved within 12 months of the closing of the global deal between Microsoft International and Nokia Corp. In the meantime, if so required by Microsoft International, the Petitioner/Applicant will act as a temporary trans....
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....ia will become employees of Microsoft International or their associates. Land, building, plant and machinery of Nokia India is located on SEZ land, which is incapable of transfer on stand-alone basis. The assets if sold in such circumstances will not fetch substantial value. The applicant has offered to deposit surplus proceeds realized after adjusting outstanding liabilities and obligations from Microsoft International on sale of assets in India with a minimum deposit of Rs.2250 crores in an escrow account to meet liabilities, if any, of the Income Tax Department. The said deposit will be made within one month of the confirmation of sale. It is stated that the Income Tax Department will have first lien. 14. The respondents have not accepted the suggestion or offer made by Nokia India. They have questioned bonafides of Nokia India and Nokia Finland, alleging that agreement dated 2nd September, 2013 was prior to the interim order passed on 26th September, 2013 but the said details were not brought to notice. Decision of Microsoft, not to purchase equity shares of Nokia Corporation and to rather purchase assets, is a convenient coincidence and an act of internal collusion between ....
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.... is alleged that the demand as computed includes amount of Rs.3100 crores for which there was no credit entry in the books of accounts of Nokia India and no payment was in fact made by Nokia India to Nokia Finland. Reference is made to the order under Section 281B which virtually had the effect of seizure of bank operations, dishonor of cheques etc. 16. At this stage, we only record that prima facie we find that there is partial truth in the allegations made by both sides against each other. In fact, the oral submissions made on behalf of the applicant at the time of initial hearing were to the effect that the offer made by them was final, give it or take it after. It is a favour and if the offer made is rejected, consequences and warnings as stated will follow. The said statements have certainly not helped and are completely unexceptionable. As noticed below, the applicant and Nokia Finland, have benefitted and should not be oblivious to the profits made from the India operations. Taxes in India, as per law have to be and must be paid. Every tax payer or person residing in India or doing business with Indian residents must comply with the law, meet their obligation and share th....
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....e. Figures with regard to indirect taxes in form of excise duty, customs duty, service tax or value added tax paid by Nokia India are not available but the said taxes paid would be substantial and significantly more than the corporate tax paid. 19. Quantum of tax demand or the project demand before us has been contested. Respondents during the course of hearing before us had filed the following chart:- (1) Intl Tax Tax (A) Interest (B) C=A + B Penalty (D) Total (C+D) (i) NIPL (201 + 201A) 1912 737 2649 1912 4561 (ii) Nokia Corp 1912 1330 3242 1912 5154 (2) CIT-V (iii) NIPL [40(a)(i)] 4292* 2000 6292 4292 10584 Total (i)+(ii)+(iii) 12183 8116 20299 CIT-V (iv) NIPL [40(a)(i) 2274** 995 3269 2274 5543 Total (i)+(ii)+(iii) 9160 6098 15258 [ALL FIGURES IN Rs. CRORE], *without S.10AA deduction, **with S10AA deduction." 20. The aforesaid figures, it is submitted on behalf of the applicant are highly debatable, overlapping and i....
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....s per the computation made by the respondents, addition under Section 40(a)(i) would result in a tax demand of Rs.4292 crores against Nokia India and interest of Rs.2000 crores on the said demand. Further if, penalty for concealment under Section 271(1)(c) @100% of the tax is imposed, Nokia India would be liable to pay another Rs.4292 crores. Thus making a cumulative total demand of Rs.10584 crores for addition under Section 40(a)(i) of the Act. Another penalty of Rs.1600/1912 crores can be imposed as per the respondents under Section 271C of the Act for failure to deduct TDS. 23. As per the computation filed by the respondents, the Nokia India would be liable to pay interest as noticed above of Rs.2000 crores on tax demand of Rs.4292 crores and Rs.737 crores on late deposit of TDS. Nokia Finland may not be liable to pay tax, if TDS is paid by Nokia India, but they would still be liable to pay interest as per calculations made by the respondents of Rs.1313 crores and also penalty under Section 271(1)(c) of the Act of Rs.1912 crores (amount may be less in case the tax payable is Rs.1600 crores and not Rs. 1912 crores). 24. The cascading effect of the issue and impact of Sectio....
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....is whether penalties can be and should be imposed under Section 271C or 271(1)(c) of the Act as the defence/plea of the applicant/Nokia Finland is legally plausible and relates to interpretation of law. These contentions and issues will have to be adjudicated and decided in the assessment, penalty and the appellate proceedings. Assessee's appeals in respect of orders passed under Section 201/201(1A) are pending before the tribunal and the decision on the said aspect will have a relevant and vital bearing on the assessment/ re-assessment proceedings against Nokia India and Nokia Finland. But the aggrieved party is likely to file appeals before the High Court and then the Supreme Court. We have referred to the orders and issues raised to highlight and point the controversy and that the questions and issues are debatable and will require indepth adjudication. We also do not wish to express any opinion on merits as this can prejudice to a party. 27. Section 281B of the Act is a provision which permits provisional attachment in respect of property belonging to the assessee during pendency of the proceedings for assessment or reassessment when the Assessing Officer is of the opinion t....
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....a and Finland ("Indo-Finland DTAA"). 3. We also understand that aforesaid proceedings are currently pending in appeal before the Income Tax Appellate Tribunal, Delhi. 4. Nokia has always recognized that its own long-term interests and those of its various stakeholders depend on strict adherence to applicable regulation, the Rule of Law and on following the highest standards of ethics. As a responsible corporate citizen committed to paying taxes in accordance with applicable national and international laws and treaties, we are obliged to pay the income tax liabilities which may ultimately be found to be payable by us pursuant to the aforesaid proceedings after exhausting all legal remedies available to us and without prejudice to our rights under the Indo-Finland DTAA (and more specifically Artile 26 of the said DTAA) and any other applicable treaty or agreement. 5. Signed in Espoo, Finland on 11th December, 2013 NOKIA CORPORATION "29. During the course of hearing, learned counsel for the applicant accepted and agreed that Nokia Finland shall make payment of tax, interest and penalty if due and payable as determined under Section 201/201(1A) and the relevant provision....
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....54.18 crores, which is significantly less and different from demand now highlighted to us in the chart. We have already commented on the said calculations. It is stated that in the order under Section 281B after meeting the current liabilities, the applicant will be left with assets of Rs.2000 crores. It is accepted that net current assets of the applicant are Rs.2347 crores and the value of the fixed assets is Rs.586.30 crores (The applicant had protested against the valuation made by the respondents during the course of hearing on 26th September, 2013 and submitted that the break-up method was not correct and was not reflective of true and correct position. Respondents had pleaded to the contrary. However, now their stands are reverse.) 34. Nokia India, in the manufacturing unit, have directly employed 8000 workers and they indirectly, it is claimed, are providing employment to another 25000 persons. Their employment is at stake and this fact cannot be ignored. Neither can we ignore the fact that Nokia India had repatriated Rs.3,500 crores, though they were aware that there was a dispute and would be claims of the Income Tax Department. As of now, the tax demand or issues are ....
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....s. 38. In view of the aforesaid position, we are inclined to modify our interim order dated 26th September, 2013, in particular clause (1) and (3) thereof. We permit and allow sale of assets by Nokia India to Microsoft/Microsoft International subject to fulfilment of the following conditions:- (i) Nokia Finland will be bound by the statement that they shall be jointly liable and shall pay tax demand determined and payable under Section 201/201(1A), interest and penalty thereon. (ii) Nokia Finland shall be liable to pay taxes including penalty and interest due and payable by them as determined under the Act i.e. the Income Tax Act, 1961. (iii) Nokia India/Nokia Finland will deposit atleast Rs.2250 crores in an escrow account, details of which will be furnished to the respondents with one month of the agreement with Microsoft/Microsoft International. The amount of deposit will go up or increase upon higher consideration being received from Microsoft/Microsoft International, as per valuation report. (iv) Copy of the valuation report will be furnished to the respondents within 15 days of acceptance. (v) Rs.2250 crores or the higher amount, which will be deposited in t....
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....ax Act, 1961. However, in case the total amount due and payable by Nokia Finland in clause (i) is less than Rs.3,500 crores, and Nokia India is unable to pay dues under clause (vi), Nokia Finland will be liable to pay tax dues of Nokia India upto but not exceeding Rs 3500 crores. In other words, Nokia Finland will not be liable to pay tax dues under clause (i), and the present clause exceeding the figure of Rs.3,500 crores. This amount has been fixed as dividend of Rs.3,500 crores stands paid by Nokia India to Nokia Finland. Demand under clause (ii) stands excluded as the said liability is personal to Nokia Finland. This limit of Rs.3500 crores does not apply to demand under clause (i). (x) Microsoft/Microsoft International will not be liable to pay tax dues of Nokia India and Nokia Finland, except when any amount due and payable as per the provisions of the Act. (xi) In case of non-compliance of clauses (i) and (ii) above or non-payment of the settled demand in terms of clause (ix), Revenue can approach the Court for appropriate orders. In such circumstances, the Court will have the power to take action or directions as may be justified and appropriate steps to ensure compli....