Original URL: http://www.theregister.co.uk/2013/12/11/nokia_chennai_microsoft_tax_freeze/

Nokia offers India £224 MEELLION to keep Microsoft deal on track

Finnish firm could be lumbered with HUGE Chennai factory

By Phil Muncaster

Posted in Business, 11th December 2013 04:27 GMT

Nokia has made a desperate bid to ensure that one of its largest manufacturing facilities is transferred to Microsoft, by offering the Indian government a Rs2,250 crore ($369m, £224m) deposit to unfreeze its assets.

The Finnish phone giant has promised to transfer the cash into an escrow account pending the result of a long-running tax dispute with the authorities which led to the asset freeze, according to India’s Economic Times.

The Delhi High Court was due to hear the matter on Tuesday, although Nokia has until only December 12 to transfer its Chennai factory assets into Microsoft’s books as part of the $7.3bn September deal between the two companies.

Failure to meet that deadline would mean Nokia being lumbered with the sprawling complex.

It would then have to go through the process of finding another buyer for the plant, although the firm could choose to run the factory under contract for Redmond for up to a year.

"In our petition to the Delhi High Court, we have maintained that the entire proceeds of the sale of Chennai factory to Microsoft will be deposited into the escrow account with a minimum guarantee of Rs 2,250 crore," a Nokia spokesperson told the paper.

"If the factory continues to remain under freeze, it will not be good either for the employees or the company. Also, as responsible employers we are trying to ensure that the future of our employees is secure."

There are 8,000 workers employed at the Chennai plant, although it’s estimated that the place is responsible for tens of thousands more jobs indirectly.

Nokia has already agreed to pay the Indian government Rs.700 crore (£70m) as part of the long-running tax dispute, which it still hopes to win.

Nokia says that so far it has received a demand notice for Rs2,080 (£207m), but there are fears the authorities may be about to raise that figure because of unpaid tax on royalty payments, according to ET.

This may scupper Nokia’s plans to get the Chennai factory transfer over the line before Thursday in what is thought to be one of the last major hurdles to the Microsoft deal.

Despite the well publicised falling-out between Nokia and the taxman, India remains one of the company's biggest markets and key to Redmond's success going forward so Microsoft will certainly want to hang on to the Chennai plant if possible. ®