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India court frees Nokia plant for Microsoft sale

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(Globalpost/GlobalPost)

An Indian court Thursday released a major plant owned by Nokia seized over a multi-billion-dollar tax row, paving the way for the Finnish giant to include the factory in the sale of its mobile business to Microsoft.

Indian authorities froze Nokia's southern Chennai plant and other assets in September over the tax battle, which could land the Finnish company with a $3.4 billion bill.

Nokia Oyj said in a statement it "acknowledges" the Delhi High Court's decision.

The court said Nokia could complete the transfer of the factory to Microsoft after it pays a 22.5-billion rupee ($365 million) deposit on its potential tax liability.

The plant is one of Nokia's biggest factories, making phones for sale across Asia and the Middle East.

Nokia reaffirmed it expected sale of its handset business to Seattle-based Microsoft Corp to be completed in the first quarter of 2014.

The Finnish firm is among a string of multinationals facing tax problems in India, including Cadbury, Royal Dutch Shell and Vodafone.

The disputes have stoked alarm among overseas investors at a time when India is desperately in need of foreign investment to boost its sharply slowing economy.

Nokia spokesman Brett Young said the company would now "start to prepare for the planned transfer of the (Indian) assets", but noted "there are still a number of statutory clearances that remain before the assets can transfer", without elaborating.

The company appealed to the Indian government "to work with urgency to facilitate the other approvals needed for the transfer and secure employment for the tens of thousands of employees involved".

The Chennai plant employs 8,000 people as well as over 20,000 workers indirectly.

Nokia had asked the court earlier in the week to lift the freeze on its assets so it could hand them over under its sale agreement with Microsoft.

"The court has accepted the company's offer of a security deposit to be placed in an escrow account," income tax department lawyer Mohan Parasaran told AFP.

"We will have a physical deposit (of funds) so we should be on a better wicket," he said.

Parasaran said the final tax bill faced by Nokia could total around 210 billion rupees ($3.4 billion) including "existing and anticipated tax liabilities".

Nokia has vowed to defend itself "vigorously" against the tax claims which it describes as "without merit".

It says it has not been served with any further tax demand beyond the one it received in February of 20.80 billion rupees ($340 million).

Nokia is abandoning the handset business to focus on making mobile network equipment as part of a turnaround strategy, while Microsoft wants to gain traction in the smartphone market against rivals like Apple.

Indian and Finnish government officials discussed the tax row in New Delhi earlier in the week, but the talks were inconclusive.

The alleged tax evasion involves software royalty payments to Nokia's parent, on which 10 percent tax should have been paid to Indian authorities, the income tax department claims.

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http://www.globalpost.com/dispatch/news/afp/131212/india-court-frees-nokia-plant-microsoft-sale-1