Nokia might consider shutting down its handset manufacturing plant in Chennai unless its efforts to get the income-tax department to lift the freeze on its assets in India appear to be succeeding.
The decision will probably have to be made in less than 10 days from now, Finland’s Minister for Foreign Affairs, Erkki Tuomioja, told a group of visiting Indian journalists.
The Chennai facility, set up in 2006, is among Nokia’s largest. It employs some 8,000 people, and has produced over 800 million phones of 20 different models over the last seven years.
Nokia, which in September agreed to sell its handset devices and services business, and license its patents to Microsoft, is in court with the I-T department after the latter ordered a freeze on Nokia’s assets in India. Tuomioja said the deal with Microsoft was at a “critical stage”, and the outcome of Nokia’s appeal to unfreeze the Chennai facility could determine whether it would eventually be part of the $ 7.2 billion sale.
“As I understand it, under the agreement, Nokia has until December 12, or just about two weeks from now. If (the issue) is not settled, the Chennai plant could be left outside the deal (with Microsoft), which would really be the worst case scenario... It could lead to the closing down of the plant and loss of jobs,” Tuomioja said last Thursday.
The Delhi High Court has listed the matter for hearing on December 9, when Nokia is supposed to offer details of its assets and liabilities, as well as how much tax it has paid in India.
The Finnish company has asked the court to unfreeze its “immovable” assets, including the Chennai facility, so that they can be transferred to Microsoft as part of the deal. It has reportedly submitted an offer to pay a minimum Rs 2,250 crore to the I-T department out of its total estimated tax liability of nearly Rs 6,500 crore.
In January this year, tax officials raided the Chennai unit amid allegations that the company may have defaulted in TDS (tax deducted at source) on payments to other countries against software supplies. I-T subsequently froze Nokia’s Indian assets to ensure that it has funds to pay the estimated bill of Rs 3,997 crore.
While the Finnish government seems to be pressing for an early resolution of the issue, Indian officials said that closing the plant may not be