Delhi High Court Agrees to Urgent Hearing of Nokia Plea to Sell Chennai Plant

The tax dispute between Nokia India and Income Tax department, which has raised a claim of Rs. 10,000 crore on the telecom firm, would be taken up by the Delhi High Court for an urgent hearing next week.

The sale of Nokia India's mobile manufacturing plant in Chennai has been frozen over the tax dispute.

A bench of justices Badar Durrez Ahmed and Sanjeev Sachdeva on Wednesday agreed to hear the matter on May 26, instead of September 7 fixed earlier, after Nokia told the court it has found a buyer for its Chennai factory.

Senior advocate Kapil Sibal, appearing on behalf of the company, said there was urgency in the matter as a buyer has been found.

He also said that Nokia would also give the list of its assets before the next date of hearing.

The IT department on the other hand said the assets number over 40,000 and their valuation was not yet known.

The company, however, said that valuation of the assets would be known as soon as the report of Ernst and Young India Pvt Ltd (EY) was received. EY was appointed by the court as the valuer for Nokia India's Chennai mobile plant and its other assets.

The court had said that EY would do the valuation of the assets of the company on both 'on going concern' (company not bankrupt) and 'non going concern' (company has gone bankrupt) methods.

On April 24, the Income Tax department had told the court that the amount offered by an "arm's length buyer" for Nokia India's Chennai plant was "very little".

An 'arm's length' transaction is one in which the buyer and seller of a product act independently and have no relationship with each other to ensure that they act according to their self-interest and are not influenced by the other party.

The IT department had said that the offer amount was very little and if the unit and related assets were sold, it would be difficult to recover the tax amount which it has tentatively placed at Rs. 10,000 crore.

This tax amount was only for one assessment year and there were demands for other assessment years, it had said.

On April 17, Nokia had submitted before the court and IT department the name of the prospective buyer and the offer made in a sealed cover.

The court had on that date asked the department to examine if the offer was acceptable and if not, then it should consider appointing an independent valuer to carry out valuation of the plant and related assets.

Another alternative, the court had suggested, was to put up the assets for auction, by making the amount offered as a reserve price, saying "ultimately we have to maximise the price".

The department had claimed in the court that according to previous orders, Nokia or its parent company in Finland had to secure the department up to an amount of Rs. 3,500 crore, but this was not done.

Nokia had argued that each day the assets remained attached and unused, their value decreases and suggested the department was free to sell it and take the sale amount towards the company's tax liability.

It had said it had met all the "players" in the market and was finally able to find an "arm's length buyer" for its assets, but cannot confirm whether the buyer will buy the assets if too much time lapsed.

The high court in December 2013 had de-freezed Nokia's assets and allowed the company to sell them subject to fulfilment of certain conditions including safeguarding the IT department for a minimum of Rs. 3,500 crores.

The alleged tax evasion pertains to royalty payment made against supply of software by its parent company, which attracted a 10 percent tax deduction under the Tax Deducted at Source (TDS) category.