Nokia says Indian tax case not expected to affect deal with Microsoft

Moneylife Digital Team 15 February 2014

Nokia said the recent developments in India about the Rs21,153 crore tax liability case is not expected to affect its $7.2 billion deal with Microsoft

Finnish Nokia said the recent developments in the Rs21,153-crore tax liability case in India is not expected to affect the timing or closing of its deal with software giant Microsoft.

“Nokia would like to stress that recent developments in India related to ongoing tax proceedings are not expected to affect the timing of the closing nor the material deal terms of the anticipated transaction between Nokia and Microsoft, announced on 3 September 2013,” Nokia said in a statement.

Last year in September, Microsoft announced that it would buy almost all of the Devices and Services business of Nokia for $7.2 billion.

Nokia said: “The transaction is still expected to close in the first quarter of 2014, subject to regulatory approvals and other customary closing conditions, irrespective of the proceedings in the Indian tax case.”

Earlier this week, Nokia’s chairman and interim chief executive Risto Siilasmaa met Indian Commerce Minister Anand Sharma at Chennai.

After the meeting, Siilasmaa said, “We are concerned about the jobs at stake at the Chennai factory. We are not planning to cut jobs in the Chennai factory but the question is whether we are allowed to transfer the factory to Microsoft.”

Nokia's Chennai-based facility, which is among assets to be transferred to Microsoft, would have to be shut down if the tax issue is not resolved.

“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.

Microsoft’s acquisition of Nokia’s device business includes the Chennai plant, which makes mobile handsets. According to the latest data, the factory employs about 8,000 people, 20% 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.

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