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Nokia faces $413 million tax lawsuit in India

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Getting slapped with a tax evasion case is everyone's nightmare. Either you fight or you fold.

Finland's phone giant Nokia even called one of its recent tax case "absurd," as it faces on Friday a new tax case amounting to €300 million or $414 million sales tax bill to the Indian Supreme Court. 

Reports say the tax bill came from the Tamil Nadu government, accusing the mobile handset manufacturer of evading taxes on phone sales within India, disguising them instead as exports.

The VAT department pointed out that Nokia failed to conform to around 50 percent of the export obligation, for which it claimed exemption from VAT for the years 2009 to 2012. Exported products from India are exempt from tax.

"It is absurd that the Tamil Nadu tax authority is now claiming that devices made in Chennai were not exported and were instead sold domestically in India," the company said in a statement, denying any false representations from them.

"We contend that this allegation has no basis in reality whatsoever; it could easily be rebuffed by a check of documentation provided to various governmental departments including Customs. Nokia will defend itself vigorously in this matter," it added.

Nokia's spokesman Brett Young revealed the new tax case is separate from the earlier Indian taxcase filed against Nokia, which also claimed that the latter didn't pay proper sales taxes for exported devices from its large phone factory based in Chennai.

The company, however, filed a writ petition against the Friday notice in the Madras High Court. It expects a case hearing next week. The petition contested the claims of the tax department and said that Indian tax authorities have regular audits on its operations in India since 2006. The filing, though, came following failed talks with tax authorities.

Some said the new tax case would complicated its current €5.4 billion deal to sell its phone business to Microsoft Corp.

"This is definitely a big threat for our employees," commented G Udayakumar, the advisor to Nokia India Thozhilalar Sangam (Nokia India Employees' Union). The factory has direct and indirect employment to 7,000 people. "Now, we are unsure whether the company (in Chennai) will exist or not," he lamented.  

Nokia, though, shrugged it off saying the Microsoft deal is about to close by March 31.

However, the Indian court instructed Nokia last week to give a 35-billion Indian rupee guarantee as well as to waive some rights to legal defense prior to transferring the factory to Microsoft. The company spokesman said it still has to consider options regarding the court ruling on its factory.  

Nokia is not the only foreign company involved in high-profile tax cases in India. Others include Royal Dutch Shell, Vodafone and IBM, among others. Reports said the Tamil Nadu's government continues to pursue unpaid taxes of $7 billion from at least 18 foreign companies.

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