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The Indian Tax Office Froze $478 Million In Xiaomi Funds In February - Reuters

The Indian Tax Office Froze $478 Million In Xiaomi Funds In February - Reuters
Indian tax officials froze $478 million in deposits held in local bank accounts of China's Xiaomi Corp in February as part of an investigation into potential tax fraud, according to a report published by Reuters quoting two sources and a court filing document, 
The financial freeze by tax officials, which was originally reported by Reuters, follows on the heels of another judicial battle in which Xiaomi has successfully contested a block on $725 million of its funds by another Indian enforcement body for allegedly illicit outbound remittances.
According to a Xiaomi court document, authorities in the income tax case stopped 37 billion rupees ($478 million) in February using a legislative clause that authorises officials to take such moves to preserve New Delhi's revenue interests.
There were no comments from Xiaomi and the income tax department of India,
Tax inspectors blocked the money as a result of raids on Xiaomi India operations in December for alleged income tax cheating, according to two sources with firsthand knowledge.
According to one of the individuals, the probe concerns charges that the Chinese business paid inflated prices in India for cellphones from its contract manufacturers, allowing it to make a lower profit by selling them to customers and avoiding corporate income taxes.
It's unclear whether the corporation has filed an appeal.
Xiaomi mentioned the income tax department's freezing in a May 4 court petition in southern Karnataka, where it is contesting the federal crime fighting agency's Enforcement Directorate's other bank account seizure in the royalty issue.
Xiaomi denies the Directorate's allegations that it made illegal foreign payments to specific businesses "under the pretext of" royalties despite not receiving any services from them. The Directorate's judgement on Xiaomi's appeal has been placed on hold until May 23 by an Indian court.
Xiaomi noted in its court petition that it "has participated in each of these inquiries and given all relevant information." According to Xiaomi, India's Income Tax Department "placed under lien" $478 million of its deposits via an order dated Feb. 18, 2022.
Since a border clash between the two countries in 2020, Chinese companies have struggled to do business in India. Since then, India has banned over 300 Chinese apps, including popular ones like TikTok, and tightened regulations for Chinese corporations investing in India, citing security concerns.
Xiaomi executives were recently accused of being intimidated by Indian Directorate officials, prompting public rebuttals from the agency and words of support from the Chinese government.
According to Counterpoint Research, Xiaomi's share of the Indian smartphone market quadrupled from 6% in 2016 to 24% last year, making it the market leader.

Christopher J. Mitchell

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