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Nokia’s Chennai factory released but tax bill still looms

Nokia has won an appeal in India that obliges the government to relinquish its phone manufacturing plant in Chennai.

The factory was seized in September by the Indian authorities due to a tax dispute with the Finnish firm.

The legal victory means that the factory can now be transferred to Microsoft, which acquired Nokia’s Devices & Services unit at around the same time as the asset was frozen. Thus far, the sale has run into difficulty in India.

As a condition for granting the appeal, the Delhi High Court has demanded that Nokia deposits INR22.50 billion ($367 million) in an escrow account. Nokia had previously indicated that it would agree to such a condition.

Although the factory has been released, Nokia is still under investigation over payments by its Indian subsidiary to its Finnish parent company. India’s tax department has claimed that Nokia has not paid tax and interest on international transfers - creating a discrepancy of INR23 billion ($375 million) - and accordingly dealt Nokia a tax notice for roughly INR20.8 billion rupees over the five fiscal years beginning 2006-07.

While Nokia has not been served with any other claims, there are reports that the department could levy fines of as much as $3.4 billion for non-payment of taxes. Tax department lawyer N.P. Sahni described the ruling as “a very fair and balanced order”, adding that “it substantially protects the interest of the revenue [department] and also enables Nokia to go ahead with its proposed deal with Microsoft.”

 

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