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Informist, Friday, Feb. 21, 2025

 

NEW DELHI – The Delhi High Court on Friday held that Nokia Networks OY in the assessment years 1997-98 to 2007-08 did not have a fixed place permanent establishment in India and, therefore, was not liable to be taxed by the income tax authorities. The court said Nokia India Pvt. Ltd., a wholly owned subsidiary of Nokia Networks, did not constitute a dependent agent permanent establishment of the Nokia Networks.

 

The high court said that interest from delayed consideration of supply of equipment and licensing of software were not taxable in the hands of Nokia Networks OY as interest earned from vendor financing. The court said that the revenue from supply of software by Nokia Networks OY could not be classified as royalty or fee for technical services under the Income Tax Act, 1961 read along with the India-Finland Double Taxation Treaty.

 

Nokia Networks OY is a company incorporated under the laws of Finland and engaged in the manufacture of advanced telecommunication systems and equipment. The GSM (Global System for Mobile Communications) equipment manufactured by Nokia Networks was used in relation to fixed and mobile phone networks. Nokia OY was also engaged in the trading of telecommunication hardware and software.

 

In 1994, Nokia OY had established a liaison office, which was followed by the incorporation of a fully owned subsidiary Nokia India in 1995. While the liaison office was still operational, GSM equipment manufactured in Finland was sold to various Indian telecommunication operators from outside India on a principal-to principal basis under independent buyer-seller arrangements. However, after incorporation of Nokia India, the installation activities were undertaken by the company in terms of independent contracts which it entered into with Indian telecom operators.

 

Nokia OY had maintained the position that the installation activities were undertaken by Nokia India in terms of separate agreements which it had entered into with Indian telecom operators. Consequently, Nokia OY did not file any return of income for the concerned period taking the position that offshore supplies were not exigible to tax. However, Nokia OY filed a return consequent to notices issued under Section 142(1) of the Act by the income tax authorities. In 2000, the assessing officer came to hold against Nokia OY on the question of taxability, the existence of a permanent establishment and attribution of income. The assessing officer proceeded to make additions under the head of profit on sale of hardware, profits on licensing of software as well as interest income.  End

 

Reported by Surya Tripathi

Edited by Deepshikha Bhardwaj

 

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