Telecom Lead India: Phone major Nokia has invoked the mutual agreement procedure (MAP) under the India-Finland Double Taxation Avoidance Agreement, to resolve the Rs 2,000 crore tax dispute with the Indian tax department.
The competent authorities of India and Finland will now decide how the dispute should be resolved, Hindu Business Line reported.
The main benefit of pursuing MAP, an alternative available to taxpayers for resolving disputes giving rise to double taxation, is the elimination of double taxation. If the MAP resolution is accepted, it would eliminate protracted legislation.
The MAP move comes in the wake of the Indian income tax department slapping an over Rs 2,000 crore tax demand on Nokia India over alleged default on tax deduction at source (TDS) on software-related payments made to Nokia Finland for six years.
The IT department had concluded that payments made by Nokia India to Nokia Finland for software downloads — which got embedded in the Nokia handsets manufactured in India — were taxable in India as royalty.
Nokia had approached the Delhi High Court, which had stayed the recovery of demand and directed the Commissioner of Income Tax (appeals) to dispose of the matter by May 31.
However, Nokia withdrew the petition as Delhi High Court had refused to interfere in the merits of the case.
