Nearly 30,000 employees at Nokia’s factory in Sriperumbudur, near Chennai, can breathe easy with the Delhi High Court revoking the tax department’s order freezing the Finnish handset maker’s India assets.
This paves the way for Nokia to transfer the India assets, including the factory, to Microsoft as part of a global deal.
Thursday was the last day for Nokia to transfer its assets across the globe. Had the freeze order not been revoked, the Sriperumbudur factory, Nokia’s biggest phone-making factory, would have faced an uncertain future.
However, Nokia’s woes are far from over as the tax demand has not been set aside and is yet to be determined. The Delhi High Court has asked the company to deposit Rs 2,250 crore in an escrow account over the next one month.
In addition, the court has asked for written guarantees by Nokia Corp and its Indian unit, taking responsibility for any outstanding tax dues once the case is fully heard. The court made it clear that Microsoft will not be liable for any tax claims.
Reacting to the court order, Nokia said: “Our current understanding is that this decision allows for the 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 treaties and practices.”
“Nokia repeats its call for 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,” it added.
In March, Nokia was served with a tax demand of about Rs 2,080 crore for five fiscal years starting 2006-07. This was disputed by the company. Meanwhile, Nokia announced a $7.4 billion deal to sell its phone business to Microsoft. Following this deal, the tax authorities seized Nokia’s assets fearing that the company could exit the country without settling the tax claims.
Deadline pressure Desperate to meet the December 12 deadline to transfer its assets to Microsoft, Nokia offered an interim payment of Rs 2,250 crore to get its factory released.
Declining Nokia’s offer, the Income Tax department had informed the High Court that Nokia India’s total tax liability had increased owing to interest and penalties. While the court on Thursday accepted Nokia’s offer as an interim measure, the company could end up paying as much as Rs 21,000 crore if it loses the case.
Tax experts said that the court order was fair and balanced. According to Daksha Baxi, Executive Director, Khaitan & Co: “It is a pragmatic and practical approach taken by the Delhi HC to ensure that the interests of both parties — Indian Revenue and Nokia — are not harmed.”