NEW DELHI (REUTERS) - An Indian court on Thursday accepted Nokia's appeal to release its local factory after its seizure by authorities in a tax dispute, removing a hurdle for the sale of the company's mobile phone business to Microsoft .

The Chennai plant is one of Nokia's biggest phone-making factories. Nokia appealed the seizure and has been trying to end the dispute ahead of the closure of the 5.4 billion euro (S$9.3 billion) Microsoft deal.

The court asked the Finnish company to deposit 22.50 billion rupees (S$460 million) in an escrow account, while the tax demand case will continue separately.

In March, Nokia was served with a tax demand of about 20.8 billion rupees for five fiscal years starting from 2006-07, according to a March 22 notice on the Delhi High Court website.