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On a day Finnish mobile handset company Nokia Corporation named India-born Rajeev Suri its global chief executive officer, its India unit was asked by the Madras High Court to pay 10 per cent of the Tamil Nadu sales tax department’s Rs 2,400-crore claim. The Court also directed the sales tax department to consider Nokia’s matter afresh.
Even as the company argued it did not have enough cash in account, judge B Rajendran, who has over the past two months heard several rounds of arguments in the case, on Tuesday directed Nokia India to pay Rs 240 crore (10 per cent of the total claim) within eight weeks.
Nokia counsel Arvind Datar told the court “the company doesn’t have enough liquidity, as it paid Rs 780 crore to the income-tax department in 2013-14 (as part of an ongoing Rs 21,000-crore tax dispute).” He also argued the company was not given an opportunity for personal hearing.
The Tamil Nadu sales tax department had in February had sent a notice that the company needed to pay taxes for three years. It alleged Nokia India sold mobile phones meant for exports in the domestic market, so it was required to pay value-added tax for 2009-10, 2010-11 and 2011-12. The company filed a writ petition in the Madras High Court against the tax demand, saying the department’s claims were baseless and seeking that the demand be set aside.
Reacting to the court order a Nokia spokesperson said: “Nokia is weighing its options for legal recourse. We would reiterate we continue to see the Tamil Nadu claim as without merit and will defend ourselves vigorously.”
Meanwhile, according to sources, the possibility of Nokia’s Chennai facility getting transferred to Microsoft, which has bought over the handset maker’s global operations, looks bleak. Microsoft has said in a statement that Nokia’s factories in Chennai and Masan (South Korea) are to stay with Nokia, as the tax liens on its India assets prevent a transfer. Asked if there was a chance of the Chennai facility also coming on board sometime in future (if Nokia addressed all disputes), a spokesperson for Microsoft said: “The deal has been completed”.
After Nokia completed transfer of its devices & services business to Microsoft on April 25, the handset maker on Monday told its Chennai factory workers that the deal was closed and the Indian facility was to work on a contract basis for a limited period, but it gave no specific timeframe.
Nokia did not share any detail about the terms and validity of the service agreement or future plan. A spokesperson for the company said: “Microsoft is the one to comment on their future plans.”
An employee at the Chennai factory said: “It is very clear that they (Microsoft) don’t want this factory. They have closed the Korean facility and now they want to do the same here.” Microsoft had originally planned to take on board 32,000 employees globally through its Nokia acquisition. After two of the eight factories slipped out of the deal, that number came down to around 25,000. Of the two that are not part of the deal, the Korean factory has only 200 employees, while the Indian one employs around 21,000 people (8,000 direct employees, 50 per cent of them women).
Amid uncertainty over job retention, Nokia has even advised its employees to explore opportunities outside of the company. “We plan to bring to Chennai and Masan the elements of our bridge programme, which we have made available for employees affected by company changes at other sites,” Nokia said.
Earlier, the company’s Chennai facility was frozen by the income-tax department, which had slapped a Rs 21,000-crore tax notice on Nokia. The department refused to allow transfer of the plant till its dues were cleared. This matter is now in the Supreme Court.
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Nokia’s Sriperumbudur (Chennai) factory at a glance
- Incorporation: 1995
- Investment: Nokia Corp made an initial investment of Rs 35.6 cr in India unit in 1996; increased it to Rs 1,858.95 cr later
- Manpower: Around 8,000 direct employees (50% of them women)
- Turonver/sales: A cumulative Rs 1,50,700 cr from 2005-06 to 2011-12
- Production: Around 800 million units (from 2005-06 to March 2014)
- Share in output: Accounts for about 50% of handsets produced by Nokia; 40-50% of the production is exported
Source: Delhi HC’s December 2013 order
