New Delhi: According to a filing seen by Reuters, China’s ByteDance has told an Indian court that a government freeze on its bank accounts in an investigation of alleged tax evasion amounts to intimidation and was done illegally.
ByteDance cut its Indian workforce in January after New Delhi upheld a ban on its famous video app TikTok, which was enforced last year following a border clash between India and China. Beijing has regularly chastised India for this and other Chinese software bans.
In mid-March, an Indian tax intelligence unit directed HSBC and Citibank in Mumbai to freeze ByteDance India’s bank accounts as part of an inquiry into the unit’s financial dealings. The freeze on the four bank accounts has been questioned by ByteDance.
Owing to the account freeze, none of ByteDance India’s employees have been paying their March salaries, according to two people familiar with the situation. The business told the court that it employs 1,335 people, including outsourced staff.
ByteDance claimed in a 209-page court filing filed on March 25 that the authorities took action against the company without any material proof and without providing prior notice, as allowed by Indian law, before such “dramatic action.”
ByteDance claimed that blocking accounts “during the course of an investigation amounted to excessive coercion.” It’s “intentionally intended to harass the petitioner.”
Over the weekend, the Directorate General of Goods and Services Tax Intelligence in India, as well as the finance ministry that oversees it, did not respond to requests for comment.
The particulars of the tax inquiry have never been made public. According to the filing, the IRS told ByteDance last year that it had reason to believe the company suppressed those transactions and demanded disproportionate tax credits.
ByteDance did not respond to a request for comment on its court filing, but told Reuters on Tuesday that it disagreed with the tax authority’s decision. HSBC and Citibank both declined to comment, and Citibank did not respond.
Advertising and other deals are being scrutinised.
In a brief hearing on Wednesday, the court refused to offer ByteDance immediate relief. On Tuesday, the next hearing will take place.
The investigation focuses on possible tax evasion involving online ads and other financial transactions between ByteDance India and its Singapore-based parent company, TikTok Pte Ltd. TikTok did not respond to a request for comment sent via email.
ByteDance told the court that its India workforce consists of 800 people who work in its “confidence and protection” team, which supports activities such as content moderation in other countries.
The company has “robust business plans in India and is not considering winding up,” according to the company, which is requesting that the court lift the injunction.