JOIN USNokia has won an appeal to release a local factory seized by authorities in a tax dispute, allowing the transfer of the plant as part of the sale of its mobile phone business to Microsoft.
The plant in Chennai is one of Nokia's biggest phone-making factories. Nokia had appealed its seizure and was trying to resolve the dispute ahead of the closure of the 5.4 billion euro Microsoft deal.
Nokia had wanted the asset freeze to be lifted by December 12 to enable the transfer of ownership to Microsoft.
But the tax dispute is still ongoing and if Nokia loses it may have to pay as much as $3.4 billion, including penalties for non-payment of tax and interest, according to a tax department lawyer.
The Delhi High Court asked the Finnish company to deposit Rs 2,250 crore in an escrow account as a condition for lifting the freeze and transferring the facility to Microsoft.Nokia's case is one of several high-profile tax disputes involving foreign companies in India, which has stepped up its pursuit of claims against such firms as it seeks to rein in its budget deficit.
Other foreign firms recently involved in tax disputes in India include IBM, Royal Dutch Shell, Vodafone Plc and LG Electronics Inc.
An extended asset freeze as a result of the dispute would have blocked Nokia from transferring ownership of the Chennai plant, possibly forcing it to operate as a subcontractor for Microsoft.
"There was the question, if Nokia couldn't sell this factory what should it do? Should they sell it later or should they be a subcontractor? This was some kind of uncertainty," said Pohjola Markets analyst Hannu Rauhala.