The income tax department has slapped a Rs 2,000 crore tax notice on Finnish mobile firm maker Nokia for alleged tax evasion on royalty payment by the Indian arm to the parent for downloading of software to manufacture mobile devices.

Nokia, in turn, has got an interim stay from the Delhi High court.

The department had on March 21 asked the firm to submit Rs 2,000 crore in about a week's time, the finance ministry officials said today.

The very next day, Nokia got an interim stay from the  court after the mobile manufacturer filed a writ before it. The court also asked the IT department to file counter-affidavit, Nokia spokesperson said in a statement.

The IT department will soon file its reply in the court stating the provisions that "enable and authorise" it to issue such a time-bound notice, the officials said.       

The issue relates to downloading of software by Nokia India from its parent company in Finland to manufacture mobile devices at its plant at Sriperumbudur in Tamil Nadu. The Indian arm paid royalty to the parent for the software downloaded. This, according to IT department attracts tax deduction at source at the rate of 10%, which amounts to Rs 2,000 crore.  

The department has analysed the company's business statements since 2006, the officials said.     

The company spokesperson reiterated the company position that it is in full compliance with local laws as well as the bilaterally negotiated tax treaty between India and Finland. The statement said the company will defend itself vigorously.

The statement further said since establishing its factory near Chennai in 2006, indeed since starting business operations in India in the mid-1990s, Nokia has been scrutinized by the authorities regularly, and its policies have been validated by the Indian and Finnish Tax authorities in the normal course of tax proceedings.

"Nokia arrived in India 18 years ago and has grown to become a market leader, contributing to the rapid growth of the Indian economy. Nokia has invested over $330 million in Chennai since setting up the factory," the statement added.

It said Nokia remains willing to cooperate fully with Indian tax authorities in accordance with all applicable laws.

Facing shortfall of tax revenues, the IT department has served notices to corporates recently. These included Shell, IBM and Vodafone. The Centre's net (of states share) corporate tax collections declined to Rs 10,535 crore in February 2013 against Rs 10,681 crore in the same month in 2012.

However, in the first eleven months of the current financial year, corporate tax collections were up just 7.7% at Rs 2.58 lakh crore against Rs 2.39 lakh crore, showed figures released by the Controller General of Accounts today. (Business Standard)