Transfer pricing laws of India and income tax provisions are in limelight these days in India. Related issue like foreign direct investment (FDI) is also raised from time to time. Indian government would ascertain beneficiary in Walmart probe to ascertain possible violation of Indian laws.
In a significant and related regulatory development, the Competition Commission of India (Procedure in Regard to the Transaction of Business Relating to Combinations) Regulations, 2011 have also been formulated by the Competition Commission of India in 2011 to regulate anti competition combinations. The same may be pressed more frequently in the year 2013.
Vodafone is already managing a tax dispute with Indian government. In fact, Vodafone may invoke arbitration for fresh tax demands by India. Similarly, recently Shell India received a transfer pricing order from Indian tax authorities. Now Nokia has been accused of income tax and transfer pricing laws of India.
The income tax department believes that besides income tax violations, Nokia India may have flouted transfer pricing norms as well. The total tax implication for the Nokia could be over Rs 10,000 crore. It is also alleged that the Indian subsidiary of Nokia transferred profits to its headquarters and the same will now be reversed and considered as income, which would be around Rs 30,000 crore. On this amount, there will be a 30 per cent tax, which works out to Rs 9,000 crore.
Further, Nokia India also downloaded software from its parent company in Finland to manufacture mobile devices worth Rs 30,000 crore at its Indian plant. Royalty is paid for the software downloaded. This, in turn, attracts a 10 per cent tax deduction at source (TDS) amounting to Rs 3,000 crore.
According to income tax officials, Nokia had failed to do this and pay to the Government. Officials in Delhi will now issue an order on the amount, including penalty if any, payable by Nokia. Meanwhile, Nokia is claiming that it has complied with all the applicable laws of India and is fully cooperating with the authorities.
For our readers, we at Perry4Law and Perry4Law’s Techno Legal Base (PTLB) have provided a research report titled Global Taxation and Anti Competition Regulatory Issues In 2012 And Projections Report for 2013 by Perry4Law that is discussing these issues. The report highlights global taxation issues including the recent allegations of tax avoidance labeled against Amazon, Google and Starbucks regarding UK Tax Laws.