An Indian court on Tuesday said China's ByteDance must deposit around $11 million that federal authorities believe the company owes in an alleged case of tax evasion, a setback for the firm which wanted to unblock its bank accounts to pay salaries.
An Indian tax intelligence agency in mid-March ordered HSBC and Citibank in Mumbai to freeze accounts of ByteDance India as it probed some of the firm's financial dealings. ByteDance challenged the move in court saying the freeze amounted to harassment and was done illegally.
ByteDance has said in court it does not owe the tax government is demanding and does not agree with the tax authority's decision to freeze its accounts.
After a government counsel said ByteDance owed the authorities about 790 million rupees ($11 million), the High Court in Mumbai said the company will need to keep that amount blocked in a state-run bank.
That amount will be frozen, the two-judge bench said.
However, the four blocked bank accounts of ByteDance had just $10 million in funds, according to the company's court filing seen by Reuters.
A counsel for the federal tax authority, Jitendra Mishra, said ByteDance can utilize the $10 million for making the court mandated deposit, but cannot use it for any other activity. Effectively, Mishra said, the accounts still remain frozen until the amount is moved to the state-run bank.
ByteDance said: "We are pleased that the High Court agreed with us that our bank accounts in India should be unblocked. This decision allows us to continue carrying out our operations in India and looking after our employees. We are prepared to take further steps required by the court and are confident in our position on this tax matter."
ByteDance in January reduced its Indian workforce after New Delhi maintained a ban on its popular video app TikTok, imposed last year after a border clash between India and China. Beijing has repeatedly criticised India over that ban and those of other Chinese apps.
Still, the company has told the court it has a workforce of 1,335, including outsourced personnel, which includes 800 people working in its "trust and safety" team that supports activities like content moderation overseas.
In the tax probe, which started in July 2020, India's tax authority told ByteDance it had reasons to believe the company suppressed certain transactions and claimed excessive tax credits, Reuters has previously reported.