Delhi HC lifts Nokia factory freeze in tax dispute, allows sale of Chennai plant to Microsoft
December, 13th 2013
The Delhi High Court on Thursday allowed Nokia Corp to sell its Chennai factory to Microsoft Corp, asking income-tax authorities to revoke the freeze on the Finland-based handset maker's assets, removing an impediment that could have hampered one of the world's most significant technology acquisition deals.
The court also asked Nokia's India unit to park a minimum of Rs 2,250 crore in an escrow account as a safeguard to assuage the fears of the tax department, which has filed a claim over unpaid levies on software for phones made at the plant.
It also asked Nokia to furnish a letter guaranteeing compliance with the order, when the dispute over the claim has been decided.
As part of the $7.2-billion purchase by Microsoft of Nokia's handset business that was announced in September, the Chennai factory had to be transferred to the US company by December 12, failing which the Finnish firm would have had to find another buyer for the unit or shut it.
I-T Claims Dues of Rs 21,000 crore Fearing that Nokia may wind up India operations without paying dues, the income-tax authorities had frozen the Chennai factory within days of the deal being announced.
The income-tax department has claimed dues of Rs 21,000 crore, which includes penalties for non-payment of tax and interest.
Only Nokia and the India unit will be jointly liable for taxes, not Microsoft, said Justices Sanjiv Khanna and Sanjeev Sachdeva on Thursday. They had reserved orders on Wednesday after hearing arguments by Nokia and the income-tax department.
The judges added that the escrow amount will rise if the payment from Microsoft increases, according to the order on the court's website. However, Nokia will have to give an undertaking to pay another Rs 3,500 crore if it loses the case, they said.
Nokia has already agreed to pay Rs 700 crore in installments by March 2014. Hence, the total outgo for Nokia could be Rs 6,450 crore.
Nokia said it will start to prepare for the planned transfer of assets, but added that a number of statutory clearances are needed before this can happen."Our current understanding is that this decision allows for transfer of the assets.
However, Nokia has been asked to meet a number of conditions in the ruling, and still needs to provide the authorities with additional documentation. Nokia expects these conditions to be in line with international tre