India may allow Nokia to sell Chennai mobile plant

Tuesday 31st March 2015 14:12 EDT

The Indian government may allow Finnish telecom firm Nokia to sell its Chennai plant with a condition that the money realised will be kept in escrow account till final verdict is out on its Rs 210 billion tax dispute. "The Prime Minister (Narendra Modi) took initiative to resolve Nokia factory issue so that mobile manufacturing can be restarted in its Chennai plant," a source said.

An inter-ministerial panel was formed in this regard and Central Board of Direct Taxes (CBDT) has agreed to the proposal of allowing sale of plant and deposit realised amount in escrow account, the source added. On March 3 in Parliament, Modi has indicated that the Tamil Nadu-based Nokia plant, which shut down a few months ago, is likely to start functioning again.

The inter-ministerial panel set up in this regard included Department of Revenue, Department of Industrial and Policy Promotion (DIPP) and Department of Electronics and IT. CBDT was part of the discussions.

The assets of Nokia's Chennai plant have been frozen by the Income Tax Department and the next hearing in the Nokia tax case is on April 6, when the resolution will be placed before the Supreme Court, the source said. "There are three buyers who have shown interest in the plant but the deal can be finalised only after the court allows its sale," the source said.

The I-T Department says Nokia India and Nokia Corporation owe Rs 211.53 billion as total tax liability, including penalty, for the seven-year period from 2006 to 2013.

US software giant Microsoft acquired Nokia's mobile devices business for about USD 7.5 billion but kept the factory out of this deal due to tax dispute with Indian authorities. The factory continued making handset under contract from Microsoft for a year after which the US firm terminated the manufacturing agreement following which Nokia suspended operation at the plant from November 1, 2014.

The mobile phone export from India crashed by 70 per cent to Rs 24.50 billion in 2014, from Rs 118.50 billion in 2013 due to production getting affected at Nokia's Chennai plant as per a report of Indian Cellular Association.

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