PriceWaterhouseCoopers faces Income-Tax heat for role in Nokia tax issue

[shobha nagrani]

PWC, of "Satyam" Fame, seems to be in the news again for all the wrong reasons. What is damming is the statement that:

"The evidence gathered so far clearly indicates that PwC has advised Nokia and they were aware of the tax evaded and accounting practices. PwC are the auditors for Nokia and they may face prosecution from Income-Tax department"

There is a provision in the Act (I forget the section) which says that even CAs and advisers who abet tax evasion can be punished. So, this may be a test case for that.

CHENNAI: The role of the Indian arm of audit firm PricewaterhouseCoopers in relation to the alleged tax defaults by handset maker Nokia India is being probed by the taxman.

A senior income-tax official, who wished anonymity, told ET that PwC would be called for questioning soon.

"The evidence gathered so far clearly indicates that PwC has advised Nokia and they were aware of the tax evaded and accounting practices. PwC are the auditors for Nokia and they may face prosecution from Income-Tax department," the official said.

"PwC was filing all the audit reports. All the communication between the two parties was through a Gmail account and not the official account," the official said.

Taxmen raided Nokia India's factory near Chennai, the Finnish company's top producer anywhere, as also its offices last week.

The Indian arm of PwC, PW and Company, said, "In the matter of the Nokia case, IT Department has called us as they are seeking our inputs on this. We will extend full cooperation to them on this matter."

Nokia couldn't not be reached for comment.

The tax department has alleged that Nokia changed its accounting policy and was also in the process of re-organising the existing business model to bypass certain direct and indirect tax liabilities.

Earlier Nokia India was one company. Now it has filed before the state and Centre for two companies. So one would be Nokia India and the other would be Nokia Sales (which would cater only to sales).

Taxmen reckon the arrangement would have worked this way: the company would have made handsets in India and sold them directly to the parent company in Finland. The parent company Nokia Corp would have then sold the same handsets in India through their sales company.

"This is a great disadvantage and loss for India," the tax official said. The department has also said that Nokia has not made tax payment for software supplies.

"They have not paid money for six years now. Remittances were made in dollar terms. Tax will be collected on the exchange rate today. Apart from that there would be a penalty for default," said the official, indicating the amount to be around Rs 3,000 crore.

http://economictimes.indiatimes.com/news/news-by-industry/telecom/pricewaterhousecoopers-faces-income-tax-heat-for-role-in-nokia-tax-issue/articleshow/18007309.cms