Nokia asked to pay service tax

Posted on | February 2, 2006 |

Nokia India Ltd, the wholly owned subsidiary of Nokia, on Thursday suffered a legal setback when a tax appellate tribunal ordered it to pay service tax on consultancy services offered by it to the parent company’s clients.

Rejecting Nokia’s appeal, the Customs Excise Sales Tax Appellate Tribunal held that services provided by the company to clients abroad were technical assistance and consultative in nature and not merely maintenance and repair services and hence the income from these services were taxable.

The issue came to light on February 2, 2001 when officials of anti-evasion branch of the central excise commissionerate visited its registered office at Radisson complex, New Delhi. During their enquiry they found that company was providing services in ‘consulting engineering’ for the telecommunication division of its parent company.

Later, the excise department calculated the estimated business of the company for the period between July 1997 and December 2000 and ordered it to pay a service tax of Rs 7.03 crore. It also imposed a penalty of Rs 17 crore under various sections of finance act for suppression and concealment of tax liabilities.

Source: Economic Times

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