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'Nokia's Chennai arm to have no work if tax issue unresolved'

February 12, 2014 19:11 IST

NokiaFinnish handset major Nokia on Wednesday warned that its Chennai factory may shut down unless a Rs 21,153-crore (Rs 211.53-billion) tax issue is resolved.

The warning came after Nokia Chairman and interim chief executive officer Risto Siilasmaa met Commerce Minister Anand Sharma and tax authorities in a bid to resolve the Rs 21,153-crore (Rs 211.53 billion) liability it faces.

The factory is among assets to be transferred to Microsoft, which is acquiring Nokia's handset business.

"We are concerned about the jobs at stake at the Chennai factory," Siilasmaa said after meeting Sharma.

"We are not planning to cut jobs in Chennai factory but the question is whether we are allowed to transfer the factory to Microsoft."

"If we are not allowed to transfer, we will have a factory but no business.

“And if we don't have a business, we can't manufacture anything in the factory. And that would be detrimental to our employees and we care for them," he said.

Software giant Microsoft's acquisition of Nokia's device business includes the Chennai plant, which makes mobile phones.

As per the latest data, the factory employs about 8,000 people, 20 per cent of them women, and about 30,000 sub-contractors.

The Income Tax Department had slapped a notice on Nokia's Indian subsidiary and froze its assets, including the Chennai factory, for violating withholding tax norms since 2006 while making royalty payments to the parent company.

While a court lifted the freeze on Nokia's assets, paving the way for their sale to Microsoft, the tax dispute remains unresolved.

"We have discussed the complex issues concerning the company and I will discuss it with the finance minister soon," Sharma told reporters after meeting Siilasmaa.

The I-T Department says Nokia India and Nokia Corporation owe Rs 21,153 crore as total tax liability, including penalty, for the seven-year period from 2006 to 2013.

Nokia had approached the Delhi High Court in the tax matter and got partial relief in the case.

Apart from lifting the freeze on the assets, the court said Nokia India and its parent would be jointly liable to pay the tax as determined and payable under Indian rules, interest and penalty.

The court asked Nokia to deposit a minimum of Rs 2,250 crore (Rs 22.5 billion) in an escrow account.

Last month, the court declined the request of the I-T Department to direct Nokia India to deposit Rs 3,500 crore (Rs 35 billion) in the escrow account and clarified that the company does not need to pay the sum immediately.

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