The Income-Tax office in Chennai has summoned audit firm Price Waterhouse and Company to appear before it in connection with the alleged tax default by Nokia to the extent of Rs 2,500 crore. Price Waterhouse and Company, which was involved in the multi-crore Satyam scam, was the auditor for Nokia as well.

“It is only based on the wrong advice of Price Waterhouse that Nokia had evaded tax payment. We have proof for this in the form of e-mail correspondence between Price Waterhouse and Nokia,” said an official of the I-T department on condition of anonymity.

“If Price Waterhouse is found guilty, we may seek prosecution of the audit firm and hand over the case to agencies like the Central Bureau of Investigation,” the official said. The audit for Nokia was done by Price Waterhouse’s Delhi branch.

Four officials, who were the signatories of Nokia’s audit report, from the branch will report to the I-T department’s office on January 16. The next day, Nokia officials will appear before the department for investigation.

Meanwhile, a Price Waterhouse and Company spokesperson confirmed that in the case of Nokia, the I-T Department has called the company as it is seeking our inputs on this. “We will extend full cooperation to them on this matter”. Price Waterhouse and Company is an audit firm and one of the network firms of PricewaterhouseCoopers in India.

Survey of plant

Last week, the I-T department surveyed Nokia’s Sriperumbudur manufacturing plant for possible tax default. After a day-long survey, the department concluded that there was a ‘strong’ case against Nokia for tax default. Any royalty payment made against supply of software by the parent company attracts a 10 per cent tax deduction. This, the department said, Nokia India did not do since its plant went on stream in 2006. Nokia India has been downloading software from its parent company to make mobile phones in India. According to a Clarification Amendment of the Finance Act, 2012, any payment made by a company to a non-resident company has to be subject to a 10 per cent tax. For the last 5-6 years, Nokia had made payments to the extent of Rs 25,000 crore on which there is to be a tax deduction at source of 10 per cent (Rs 2,500 crore). This, the company has not paid to the department.

Globally, the Sriperumbudur plant is one of the largest for the Finnish telecom major. The company has invested over $300 million at the 210-acre plant, which is located on the Chennai-Bangalore National Highway. With production of over 500 million units in six years, this is the largest Nokia production facility. It employs 9,000 people, 70 per cent of whom are women.

raja.simhan@thehindu.co.in

(This article was published on January 13, 2013)
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