Nokia's India plant in Chennai may be left out of Microsoft deal

Nokia Microsoft deal, Nokia, MicrosoftFinnish phone maker Nokia may have to exclude its Chennai plant from the USD 7.2 billion deal with Microsoft if tax issues facing the India unit are not resolved by next week. Reuters

Finnish phone maker Nokia may have to exclude its Chennai plant from the USD 7.2 billion deal with Microsoft if tax issues facing the India unit are not resolved by next week.

Finland's Foreign Minister Erkki Tuomioja has voiced concern over the Chennai plant, which employs many thousand people, being left out of the Microsoft-Nokia deal if the tax dispute with Indian authorities is not resolved and assets of the plant remain frozen by December 12.

"There is an agreement between Nokia and Microsoft that unless this dispute is solved and the assets of its Chennai plant unfreezed before December 12, the Chennai plant would be left outside of Nokia-Microsoft agreement," Tuomioja told a group of visiting Indian journalists here.

"That of course, in the worst case, could lead to closing down of the Chennai plant, which is employing many thousand people, and with sub contractors up to 30,000 people. So, I think that would not be (in) anyone's interest," he added.

When contacted, Nokia said if its assets continue to be frozen by tax authorities then "it must prepare for the eventuality that the Indian factory assets do not transfer to Microsoft."

"This would create regrettable uncertainty at Chennai facility, as this is an industry where quick decisions are essential to success...The unfreezing of assets should happen by December 12 at the latest," the company said.

Nokia's Chennai plant is one of its biggest facilities.

An offer by Nokia to settle the matter was rejected by the Revenue Department yesterday and the court has listed the matter for December 9.

The Income Tax Department had slapped a notice on Nokia's Indian subsidiary for violating withholding tax norms since 2006 while making royalty payments to the parent company in Finland.

Nokia moved the Delhi High Court seeking lifting of stay on transfer of its assets here and offered to pay a minimum deposit of Rs 2,250 crore as tax, contending that the injunction will jeopardise the sale of its Indian arm to Microsoft under the global deal.

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