The government was making every effort to revive handset maker Nokia’s closed unit at Sriperumbudur near Chennai, Prime Minister Narendra Modi said in Parliament on Tuesday, hinting at an out-of-court settlement of a pending tax dispute that did the unit in. Nokia closed down the unit on November 1 last year, citing lack of fresh orders from its new parent Microsoft Corporation, consequent to the termination of a purchase agreement, rendering some 8,000 jobless.
But what led to the plant shutdown was also a couple of tax demands it continues to fight in Indian courts.
The Prime Minister’s Office has for the last few weeks been coordinating with the department of industrial policy and promotion and the department of electronics and information technology to find a solution to the issue. The Modi government, which is hard-selling India’s potential to be a manufacturing hub with its ‘Make in India’ campaign, reckons that bringing the Nokia unit back to life would bear testimony to its ability to boost investor confidence.
The income tax department had, in 2013, raised a demand of Rs 21,153 crore on Nokia in 2013 over non-deduction of tax at source concerning royalty payments to its then parent, the Finland-based Nokia Oyj. When it received the I-T notice, it was preparing to sell its assets in India to Microsoft as part of a global transaction. The department feared sale of the assets would come in the way of its recovering the tax dues, and this subsequently led to the company keeping the Indian plant outside the the global sale.
The company challenged the I-T order in the Delhi High Court, which then directed it to remit Rs 2,250 crore in an escrow account and give a guarantee covering its tax liabilities. The apex court too later upheld this decision. Nokia separately paid about Rs 700 crore towards tax. It has another tax dispute, over alleged VAT liabilities, with the Tamil Nadu government.
In his hour-long reply to the motion of thanks to the President’s Address in the Rajya Sabha, Modi also spoke about the issue of black money over which questions are being asked of his government about what has been done in the nine months it has been in power. “I believe that the dream of bringing black money would have been possible by now had an SIT (special investigation team) been formed in 2011 when the Supreme Court had asked for it. That time the SIT was not formed because there was an attempt to save somebody,” he said.
He also denied any move to reduce compensation to farmers under the Land Acquisition Act or any dilution of the Food Security Act as he sought the support of the Opposition in pushing key legislations in Parliament.