Nokia breathes again as Indian $383M tax demand suspended

Nokia has seen a demand from the Indian tax authorities suspended by a local court after being ordered to pay $383 million within 30 days for failing to properly pay taxes.

Indian tax officials issued the demand last month after raiding Nokia's huge handset factory in Chennai, Southern India. The order from the Indian tax authorities covered five fiscal years starting from 2006/07, according to Reuters.

Responding to the raid, Nokia said it was unmerited and objected to tax officials entering the plant without notice or reason.

"Nokia reiterates its position is that it is in full compliance with local laws as well as the bilaterally negotiated tax treaty between the governments of India and Finland and will defend itself vigorously," the company said in a statement carried by Reuters.

The company, citing claims by anonymous tax officials in the media, said the action appeared to relate to taxes on payments made for supplying software from its parent company in Finland for devices produced in India, according to Dow Jones Newswires.

Nokia added that it would vigorously defend itself against this tax demand, but indicated it was willing to cooperate with tax officials for a "prompt and just resolution to the matter."

The local court that has suspended the tax demand has requested further information from the tax authorities. In the meantime, it has directed the Indian unit of Nokia not to transfer any funds outside India "except in the normal course of business" until the hearing on April 10, according to the Wall Street Journal.

This action over tax is politically sensitive for Nokia given that India is critical to the company efforts to hold on to global market share. The company's new Asha line of low-end smartphones is widely seen as key to its future, with success in the Indian market being vital for these cheaper models.

For more:
- see this Reuters article
- see this Dow Jones Newswires article
- see this Wall Street Journal article

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