Tax case unlikely to hurt Microsoft deal, says Nokia

The company is facing a Rs 21,153-crore tax liability case in India

Finnish handset major Nokia has said the developments in the Rs 21,153-crore tax liability case in India is not expected to affect the “timing or closing” of its deal with software giant Microsoft. Last year in September, the US-based firm had announced it will acquire almost all of the Devices and Services business of Nokia for $7.2 billion.     

“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 September 3, 2013,” Nokia said in a statement late Friday night.     

The handset maker further 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 after meeting Commerce Minister Anand Sharma had said the Chennai factory, which is among assets to be transferred to Microsoft, would have to be shut down if the tax issue is not resolved.     “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.

Microsoft’s acquisition of Nokia’s device business includes the Chennai plant, which makes mobile phones. According to 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.