Indian tax officials seized $ 478 million worth of deposits in China’s Xiaomi Corp 1810.HK local bank account in February as part of an investigation into alleged tax evasion, according to two sources and a court filing reviewed by Reuters.
The suspension of funds by tax authorities, reported for the first time by Reuters, is at the top of another legal battle over Chinese smartphone giant Xiaomi where it has been challenged – successfully so far – by a block over ভারতীয় 725 million of its funds by another Indian enforcement agency. For alleged illegal foreign remittances. Read the full story
In the income tax case, authorities blocked Rs 37 billion ($ 478 million) in February under a legal provision that allowed officials to take such steps to protect New Delhi’s revenue interests, Xiaomi showed in court documents.
Xiaomi did not respond to a request for comment.
A spokesman for the income tax department declined to comment.
Two sources with direct knowledge said the amount was blocked by tax inspectors as a result of a December raid on Xiaomi’s India office alleging income tax evasion.
That investigation, one of the sources said, was that the Chinese company bought smartphones from its deal in India at inflated prices, which sold them to consumers and allowed it to record a small profit by evading corporate income tax.
It is not clear if the company has appealed the decision.
The Income Tax Department refrigerator was cited by Xiaomi in a May 4 court in the state of South Karnataka, where it is challenging the seizure of another bank account by the Federal Crime Fighting Agency, Enforcement Directorate, in a royalty case.
The department denies that Xiaomi made illegal foreign remittances to certain companies “in the guise of royalties” even though it did not receive any services from them, the department denied the allegations. The Indian court has stayed the decision of the department till May 23 on Xiaomi’s appeal.
Citing two investigations, Xiaomi stated in its court documents that it “cooperated in each of these investigations and provided all necessary information.”
The Income Tax Department of India “vested $ 478 million of its deposits” in an order dated February 18, 2022, Xiaomi stated in its filing.
Chinese companies have been fighting to do business in India since 2020, when the two countries clashed. India has since cited security concerns in banning more than 300 Chinese apps, including popular apps like TikTok, and tightening rules for Chinese companies investing in India.
Xiaomi recently hit the headlines with allegations that its executives have been threatened by Indian state officials, public denials from the agency, and support for the Chinese government. Read the full story
According to Counterpoint Research, Xiaomi has quadrupled its share of the Indian smartphone market from just 6% to 24% in 2016, making it the market leader.
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