Nokia India has got itself into a terrible mess over alleged failure to deduct TDS on royalty payments to its parent company. What would have ended with a mere 10% tax rate has now morphed into a horrendous tax liability. It will take all of Harish Salve’s wizardry to pull Nokia out from the deep hole it is in. Can he do it?
“It scarcely lies in the mouth of the taxpayer who plays with fire to complain of burnt fingers”
-- Lord Greene M.R., in Lord Howard De Waldan v. IRC [1942] 1 KB 389
Anybody dealing with multinational conglomerates will tell you that their biggest problem is one of overconfidence and lack of accountability, especially when dealing with poverty-stricken third World countries. Deals worth billions of dollars are put through by some expatriate executive, high on adrenalin, sitting in an exotic location like New York, London or wherever, without a second’s thought for the legal and tax implications in the dusty by-lanes of the Third World Country where the deal is to be implemented.
Somehow, a feeling seems to have developed amongst the MNCs that because these Third World countries need foreign capital so desperately, the MNCs can do what they want and get away with it, with nobody to pull them up.
We saw how this attitude got Rolls Royce, the so-called torch bearer for good corporate governance, into serious trouble with the Indian tax authorities. The Tribunal expressed unhappiness that Rolls Royce concealed the true facts as to its taxable transactions and this finding was upheld by the High Court.
Nokia seems to be a victim of the same “Devil may care” attitude. It set up a subsidiary in India, Nokia India Pvt. Ltd, to manufacture mobile phones. It invested over $300 million at the 210-acre plant in Sriperumbudur, near Chennai, and produced 500 million units in six years. Nokia agreed with the Indian subsidiary to provide it with the technology and technical know-how required for this purpose and in return, the subsidiary had to pay it royalty.
Courtesy: The Income Tax Appellate Tribunal Bar Association, Mumbai
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When they fail to deliver they advise 'petition', AS CAN BE MANAGEABLE!
IF GOVT. IS INCLINED TO RECOVER IT ALWAYS CAN!?
FYI, ALL POLITICAL PARTIES LEGAL LUMINARIES ARE HEAVY WEIGHTS & ARE SOUGHT AS LEADING COUNSELS!
In the event you understand international financials vis-a-vis taxation in the originating country possibly you overlook certain aspects.
Why Cyprus has negotiated new tax pact with India? A month earlier it was declared as a 'notified country' [jurisdiction].
So in the talks in Delhi, Nov 26-28, both sides agreed to abide by Article 26, OECD tax convention. So as agreed 94A IT will not prevail.
DTAA aspects yet not clear.
So if MNC's try dodging transfer pricing regulations, the assesses have to prove it to the satisfaction of Indian tax authorities.
With my aspect i can exclude only Shell India, wrongly caught on issuance of shares to parent co.
Irrespective if Indian taxation laws are well understood & NOT TWISTED by certain vested interests ON SAYING OF TAXATION experts the sad,sad aspect of tax litigation's will not arise.
In the battle its the legal experts [counsels] who earn.
Vodafone as of now has spent at least $20mn in UK & in India. [to battle it's 11KCR tax case.]
Yet in next two years it envisages to invest $3bn in India!? Is it a bait? NO!
A survey of 1.6K executives from 72 countries, 20 industry sectors, apart from various other aspects, when asked where they would invest in next 12 months, India ranked at No.1! Germany 15, US 5th, China 3rd, Brazil 2nd!
My aspect straight - experts opine saying manageable!
Why Rolls Royce in doldrums & trying to reinvent itself? Who are the takers? Whereas Tata's have turned around JLR!? OK.
WHERE IS FIAT?
Regards,