New Delhi: The Delhi High Court Monday appointed Ernst & Young India Pvt Ltd as valuer for Nokia India's Chennai mobile making plant, frozen over an alleged Rs 10,000 crore tax dispute with the Income Tax department.
A bench of justices Badar Durrez Ahmed and Sanjeev Sachdeva appointed the multinational professional service firm after it was informed by the Income Tax department that Nokia had written a letter to the Union revenue secretary informing him of appointing the valuer for its Chennai plant.
"The valuation of the assets will be done by Ernst & Young India Pvt Ltd. Counsel for Income Tax department says he has no objection to the valuer appointed by the said company. The said valuation should be done in two months. Put it for further hearing on September 7," the bench said.
The bench also said that Ernst & Young India Pvt Ltd will do the valuation of the assets of the company on both 'on going concern' (company not bankrupt) and 'non going concern' (company has gone bankrupt) methods.
During the hearing, counsel for Nokia said although it has written to revenue secretary about the appointment of Ernst & Young, the valuation firm has expressed some reservation and now it has been approaching a Korean firm for the valuation.
Counsel for Income Tax department said that it has no objection to any valuer appointed by company but the valuation should be done 'on going concern' method.
The bench was hearing an urgent plea filed by Nokia seeking permission to sell the assets as it had found a prospective buyer.
On April 24, the Income Tax department had told the court that the amount offered by an "arm's length buyer" for Nokia India's Chennai mobile making plant, is "very little".
An arm's length transaction is one in which the buyer and seller of a product act independently and have no relationship to each other to ensure that they act according to their self-interest and are not influenced by the other party.
The department had told the court that the offer amount is very little and if the unit and related assets were sold, it would be difficult to recover the tax amount which it has tentatively placed at Rs 10,000 crore.
According to the IT department, the amount is for only one assessment year and there are other assessment years.
On April 17, Nokia had submitted before the court and IT department the name of the prospective buyer and the offer made in a sealed cover.
The court had on that date asked the department to examine if the offer was acceptable and if not, then it should consider appointing an independent valuer to carry out valuation of the plant and related assets.
Another alternative the court had suggested was to put up the assets for auction, by making the amount offered as a reserve price, saying "ultimately we have to maximise the price".
The department had earlier told the court that according to previous orders, Nokia or its parent company in Finland had to secure the department up to an amount of Rs 3,500 crore, but the same has not been done yet.
Nokia had earlier argued before the court that each day the assets remain attached and unused, their value decreases and suggested the department is free to sell it and take the sale amount towards the company's tax liability.
It had said it met all the "players" in the market and finally was able to find an "arm's length buyer" for its assets, but had said it cannot confirm whether the buyer will buy the assets if too much time lapses.
The high court in December 2013 had de-freezed Nokia's assets and allowed the company to sell them subject to fulfillment of certain conditions including safeguarding the IT department for a minimum of Rs 3,500 crore.
The alleged tax evasion pertains to royalty payment made against supply of software by its parent company, which attracts a 10 percent tax deduction under the Tax Deducted at Source (TDS) category.
