'Nokia India will look for buyer for Chennai unit over tax dispute with govt'

Written by PTI | New Delhi | Updated: Dec 10 2013, 03:28am hrs
Nokia, Nokia Microsoft dealFinnish handset maker Nokia said it will have to look for another buyer for its Chennai manufacturing unit if it cannot transfer the plant to Microsoft due to the tax row with the government.
Finnish handset maker Nokia today said it will have to look for another buyer for its Chennai, India manufacturing unit if it cannot transfer the plant to Microsoft due to the tax dispute with the government.

US software giant Microsoft had in September agreed to acquire Nokia's devices and services business for USD 7.2 billion. The Chennai unit, which employs about 8,000 persons, was part of the deal.

However, the Nokia unit may have to be segregated if the tax dispute is not settled before December 12 and company may then look at providing contract manufacturing services to the US-based company for about a year, a senior Nokia official said.

Since the facility will have no use for Nokia post the Microsoft deal, they will try to find another buyer for it, the official said.

Nokia today also offered the government that it will deposit Rs 700 crore so that it can fight the case, besides its offer that if authorities allow sale of Chennai unit the firm will deposit the cash generated out of it with them, which will be a minimum Rs 2,250 crore.

"We will do our best to get this deal done. But, we also agreed with Microsoft that if the assets are not transferred to them then we will for concessional period offer contract manufacturing services out of the factory assets and by doing so we will try to secure employment for as many employees possible.

"Given that Nokia will not be needing this assets for its own future operations, we will need to seek to try to find another buyer for this asset here," the official said.

The official said that the company "disputes" the tax claims that have been issued to them.

"It will be in the best interests of the employees and tax officials because what we are offering them is that we will be replace the Chennai factory with cash proceeds that we will receive by selling it to Microsoft.

"We have committed that cash amount will be a minimum of Rs 2,250 crore and if you look at this from a numbers point of view, the case and the claim, is for approximately Rs 2,080 crore," the official added.

Presently, Nokia is trying to enable the de-freezing of the factory assets for its sale to Microsoft.

"We have already today agreed to deposit Rs 700 crore to be able to take this claim and go through court proceedings over the next few years, taking the total amount to almost Rs 3,000 crore. This is higher than the original tax claim," the official said.

We have not received official tax claim of Rs 21,153 cr: Nokia

New Delhi, Dec 9 (PTI) Nokia today said that it has not been served with "any official claim" of the Income Tax (I-T) department that has told the Delhi High Court that the mobile company owes it Rs 21,153 crore as tax liability (existing and anticipated), including penalty.

The company in a statement said that in the recent months it has seen and read about many claims from the I-T department and added that these are "without merit" and it will defend itself "vigorously" in court.

"We have not been served with any official claim, so we cannot comment on this. We want to stress that our main focus right now is to remove the freeze on our Indian assets, including Chennai, before the deadline of December 12. This is a separate matter from the broader tax dispute.

"In recent months we have seen and read about many claims from the tax authorities. We feel they are without merit and will defend ourselves vigorously in court," the statement said.

The amount payable by Nokia has been arrived at by the I-T department on the basis that the mobile manufacturing firm does not discharge its TDS liability on royalty payments and is not entitled to any deduction under tax laws for operating from a special economic zone (SEZ).

The submission has been made by the I-T department in its reply to Nokia's plea for unfreezing of its assets in India prior to its USD 7.2 billion deal with Microsoft.

In case TDS liability is paid and the deduction under tax laws for operating from a SEZ is available to Nokia, then its total tax liability (existing and anticipated), including penalty would be Rs 14,200 crore, the I-T department has said.

Meanwhile, the high court adjourned the hearing on Nokia's plea to tomorrow when the company may have to answer the court's queries regarding the total investment made by it in India, dividend paid by it, quantum of purchases of raw materials, whether Nokia Corporation has been filing returns here and what will happen to Nokia Corp post-Microsoft deal.

Nokia offers $369 mln deposit to unfreeze Indian assets

Nokia has offered to pay a 270 million euro ($369 million) deposit to Indian authorities to unfreeze assets in a tax dispute, according to sources familiar with the matter.

The Finnish firm has been trying to free up the assets, particularly its Chennai factory which is one of its biggest phone-making plants, ahead of the sale of its mobile phone business to Microsoft.

The offer comes on top of an earlier agreement to pay around 85 million euros, although Nokia hopes to eventually retrieve the payments if the tax dispute is resolved in its favour, one of the sources said on Monday.

The combined payment would exceed the income tax bill of 20.8 billion rupees ($338 million) demanded by local authorities in one of several tax disagreements involving foreign companies in India.

While Nokia has said it does not expect the dispute to affect its 5.4 billion euros deal with Microsoft, which is expected to close in the first quarter of 2014, a lengthy asset freeze could complicate matters by preventing the transfer of ownership in the Chennai plant.

An asset freeze would allow the facility to operate as usual but prevent a change of ownership. If it is still in place when the Microsoft deal is finalised, Nokia could briefly operate the plant as a contract manufacturer for Microsoft, but both companies are hoping to avoid this.

Nokia declined to comment beyond saying it was committed to getting its Indian assets unfrozen and "once again calls on the Indian government and tax authority to work with urgency towards a solution".

The Delhi High Court is due to hear the case on Tuesday.