Xiaomi India Bank Accounts Seized For Forex Violations: ED

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A total of Rs 5,551.27 crore has been confiscated by the Directorate of Enforcement (ED) under the provisions of the Foreign Exchange Management Act, 1999, according to a statement released on Saturday by the federal agency. 

Xiaomi India is a completely owned subsidiary of the Xiaomi group, which is situated in China. 

The ED has seized the sum of Rs 5,551.27 crore that was held in the company’s bank accounts,” according to a statement issued by the organisation. 

The ED had launched an inquiry into the illicit remittances made by the firm in the month of February of this year, which had prompted the probe. According to reliable sources, the agency is looking into the company’s foreign financing, ownership, financial accounts, and other connected matters.

Earlier this month, the agency invited Manu Kumar Jain, Xiaomi’s global vice-president, to appear in person before them. According to Jain, his testimony was taken down in the agency’s Bengaluru headquarters. 

According to the agency, the corporation began operating in India in the year 2014 and began remitting funds to the country in the following year. A total of Rs 5,551.27 crore has been paid to three foreign organisations, one of which is a Xiaomi group firm, in the form of foreign currency equal to Rs 5,551.27 crore. 

Such massive sums in the guise of royalties were sent on the directions of their Chinese parent group organisations,” the statement said. The cash paid to two additional unrelated organisations in the United States was similarly intended for the ultimate advantage of the Xiaomi group firms, according to the statement. 

A spokesman for the corporation did not immediately respond to a request for comment. 

The investigation also discovered that Xiaomi India is a dealer and distributor of mobile phones in India under the brand name MI, according to the findings of the investigation. Xiaomi India purchases mobile phones and other items from manufacturers in India that are totally assembled and finished.

Neither Xiaomi India nor the three foreign-based businesses to whom the funds have been sent has used any of the services provided by them. 

‘Under the cover of several unconnected documentary façades formed among the group businesses, the corporation transmitted this sum in the name of royalty overseas, which is a breach of Section 4 of the Federal Emergency Management Act.’

“In addition, the business submitted false information to the banks while remitting the money overseas,” the ED said. 

AT has learned that the ED’s inquiry followed inquiries conducted by the Income Tax (IT) department, which has raided these firms in the past, according to sources acquainted with the situation. In the course of their investigations, tax sleuths claimed to have recovered information supposedly correlating to allegations of tax evasion. 

Short-form video applications TikTok and Snack Video have been prohibited by the Chinese government in 2020, but a comparable app – Zili – is still available and managed by Xiaomi. 

Following its investigations, the IT department said that it had discovered a novel mode of operation in which foreign monies were inserted into the records of an Indian firm. The sources of such cash, on the other hand, is described as “of questionable character.” 

“The total amount of such borrowings amounts to around Rs 5,000 crore, on which interest expenditures have also been claimed,” the statement said. 

It was also revealed by the IT department that one of the firms had overstated costs and transfers on behalf of linked enterprises, which resulted in a decrease in the taxable earnings of the Indian mobile device maker. In the report, it was said that the sum might be in excess of Rs 1,400 crore. 

Published By : Sachin soanwane

Tharun Pranav
Tharun Pranav
Tharun Pranav is a Law student in the School of Law, Christ University. He is an Extrovert and a Pensive person in nature. One of his strengths is Sarcasm. He also has a passion for Space, Economics and Sports. You can find him online on Instagram or LinkedIn.

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