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Tamil Nadu justifies Rs 2,400 crore Nokia tax
March, 29th 2014

The Tamil Nadu government, which has slapped Rs 2,400 crore commercial tax demand on Nokia India Private Limited, has justified the notices saying the mobile handset giant did not furnish documents to establish exports.

Handsets manufactured in India but not exported would entail 4% VAT, payable to the state government. In the absence of proof of export of handsets worth more than Rs 44,000 crore during three assessment years - 2009-10, 2010-11 and 2011-12 -- the government was constrained to issue notices to Nokia, Tamil Nadu advocate general A L Somayaji told the Madras high court on Friday.

The matter was heard by Justice B Rajendran, who then adjourned it to April 1 for further hearing. Earlier this week, Nokia filed three separate petitions assailing the tax demand, saying its had been raised on surmises, that too without hearing the company's version or granting an opportunity to it to furnish all relevant documents.

"No opportunity of personal hearing was acceded to Nokia. The deputy commissioner had worked with a single-minded goal to confirm the tax demand," Nokia said in its petition.

As for the state government's stand that despite being given an opportunity, Nokia failed to furnish all documents to prove exports, Nokia said it had submitted only sample documents because exports data was voluminous. "However, even without conveying that the entire documentation was required to be submitted, and without giving any further opportunity to Nokia, the deputy commissioner passed the order on February 28, 2014, in a biased manner and in undue haste," Nokia said.

Somayaji, however, argued that though notices were sent for all the three assessment years, Nokia chose to respond only to the notice for 2009-10, that too without seeking any personal hearing. The reply only sought additional documents and time, advocate general told the court.

Rejecting Nokia's claim that it was entitled to personal hearing under Section 22(4) of VAT Act, Somayaji said it was a case of reopening of assessment as provided for under Section 27, and there was no room for personal hearing in the provision.

Noting that Nokia was already under the income tax net for tax issues and that some of its property had been reportedly attached by the I-T department, Somayaji said, "Nokia itself has admitted in the court that it was under severe financial difficulties. In view of the admission, it is all the more important that the court should not grant any interim order of stay."

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