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Delhi High Court has ordered Nokia to deposit 22.5 billion rupees ($367 million) in an escrow account, as a condition for lifting the freeze from Nokia India’s attached assets. Due to an ongoing tax dispute with Income-Tax authorities in India, Nokia’s assets were seized and it was apprehended that Chennai plant may be left out of the deal. Now, this court order paves way to transfer of Chennai manufacturing plant to Microsoft as a part of the global Microsoft-Nokia’s deal.

The tax demand case will still continue and according to claims by an Income tax department lawyer, Nokia can be slapped with a tax demand as high as $3.4 billion, which includes penalties for non-payment of tax and interest.

Including the tax bill for the years that have not been assessed by the Indian authorities, the total liability could rise to roughly 75 billion rupees, Reuters reported on Dec. 11, citing the tax department’s lawyer. If Nokia loses the legal battle, it may have to pay as much as 210 billion rupees ($3.44 billion), including penalties and interest, the lawyer said.

Though Nokia has denied receiving any such high tax claims from authorities, after the initial $340 million tax demand.

In a statement issued before the court’s final order, Nokia said it “has not received any official information on the potential tax claims, and thus far has only seen wildly varying claims from anonymous officials via the media. We do not see any merit in any of the claims.”

Nokia is not alone and companies like IBM, Vodafone, Royal Dutch Shell etc have been at receiving end of such tax demands in India.  This certainly doesn’t help India’s image of a favorable destination for MNCs.

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