The Delhi High Court today agreed to unfreeze Nokia India's assets and allowed further transfer of its India assets in view of its $ 7.2 billion global deal with Microsoft.<br /><br />

The Delhi High Court today agreed to unfreeze Nokia India's assets in view of its $ 7.2 billion global deal with Microsoftafter the former agreed to pay Rs 2250 crore as interim payment in the tax caseover and above the Rs 700 crore tax payment ordered before.

In March, Nokia was served with a tax demand of about Rs 2,080 crore ($340.45 million) for five fiscal years starting from 2006-07, according to a 22 March notice on the Delhi high court website.

A bench of justices comprising Sanjiv Khanna and Sanjeev Sachdeva, which on Wednesday reserved its order after hearing arguments from the mobile manufacturing company and the I-T department, asked Nokia to deposit Rs 2250 crore as an interim payment in the tax case in an escrow account in a period of one month.

However, the deposit amount may rise if the assets are valued higher. Nokia has also been asked to submit a letter ofguarantee stating that it will complywith the court's order.

The Delhi High Court said Nokia Corp is liable to pay its India arm tax dues amounting to Rs 3,500 crore but categorically stated that Microsoft will not be responsible for any tax liability.

The Chennai plant is one of Nokia's biggest phone-making factories and was seized by authorities because of tax claims. Nokia appealed the seizure and had been trying to end the dispute ahead of the sale of its mobile phone business to Microsoft in a $7.4 billion deal.

The Income Tax Department canre-approachthe case if Nokia defaults in future tax payments.

The High Court further said Nokia and the income tax department were free to reach a mutual agreement.

>Nokia's case is one of several tax disputes involving foreign companies in India, which has stepped up its pursuit of claims against such firms as it seeks to rein in its budget deficit.

Nokia's counsel had earlier argued that if the tax row was not resolved by December 12, its Finnish parent company Nokia Corp's deal with Microsoft may land in trouble.

Declining Nokia's offer, I-T department had informed the high court that Nokia India's tax liability is over Rs 6,500 crore.

The amount payable by Nokia was arrived at by the I-T department on the basis that the mobile manufacturing firm does not discharge its TDS liability on royalty payments and is not entitled to any deduction under tax laws for operating from a special economic zone (SEZ). In case TDS liability is paid and the deduction under tax laws for operating from a SEZ is available to Nokia, then its total tax liability (existing and anticipated), including penalty would be Rs 14,200 crore, the I-T department has said.

If Nokia loses the legal battle, it may have to pay as much as Rs 21,000 crore ($3.44 billion), which includes penalties and interest.