By Sumeet Chatterjee and Ritsuko Ando
NEW DELHI/HELSINKI Dec 12 Nokia 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 the southern city of 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 ($7.4 billion) Microsoft deal.
Nokia had wanted the asset freeze to be lifted by Dec. 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
The Delhi High Court asked the Finnish company to deposit
22.50 billion rupees ($367.17 million) in an escrow account as a
condition for lifting the freeze and transferring the facility
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
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
"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. "But of course, we still don't
know how much Nokia has to pay."
A spokesman for Nokia in Helsinki said the company would
comment after analysing the ruling.
"It's a very fair and balanced order," said N.P. Sahni, a
lawyer for the tax department. "It substantially protects the
interest of the revenue (department) and also enables Nokia to
go ahead with its proposed deal with Microsoft."
In March, Nokia was served with a tax demand for about 20.8
billion rupees covering five fiscal years starting from 2006-07,
according to a notice on the Delhi High Court website.
Including the anticipated liability, or the tax bill for the
years that have not been assessed by the authorities, the total
liability could be roughly 75 billion rupees, Mohan Parasaran, a
lawyer representing the tax department, said on Wednesday.
If Nokia loses the legal battle, its liability could total
210 billion rupees, which includes penalties and interest,
Parasaran said. He declined to give additional details.
Nokia shares, which had fallen over 2 percent earlier in the
day on uncertainty about the case's outcome, were flat by 1145
GMT. They have risen over 90 percent since the Microsoft deal
was announced in early September.