Nokia's Chennai plant could be excluded from Microsoft deal

Nokia could be forced to shut down its Chennai plant if the tax tussle with the Indian authorities is not resolved soon. Unless the Indian tax department agrees to relax Nokia's tax liability the plan could be shut, reports The Economic Times. Making things worse, the impasse must end before December 12.

The Chennai facility was set up in 2006. It is one of Nokia’s largest immovable assets that employs some 8,000 people, and has produced more than 800 million units of 20 different phones over the last seven years.

The I-T department had slapped a total estimated tax liability of nearly Rs 6,500 crore on the Finnish company, whose assets were also frozen by the government. And Nokia has been asking the court to unfreeze its 'immovable' assets, including the Chennai facility, so that they can be transferred to Microsoft as part of the impending deal between the two companies. The company has reportedly submitted an offer to pay Rs 2,250 crore to the I-T department out of its total estimated tax liability, so the Chennai plant can be included in the deal.

The billion dollar handshake!

The matter has been listed for a hearing on December 9 in Delhi High Court. Nokia is supposed to provide details of all the assets and liabilities and how much tax it has paid in India. The final outcome of Nokia’s appeal to unfreeze the Chennai facility would decide whether it will pass on to Microsoft as part of the Nokia deal. In September, Microsoft bought Nokia's devices and services unit for $7.2 billion. The deal is expected to close in Q1 of 2014.

"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,"  Finland's Foreign Minister Erkki Tuomioja told the publication.