Freezing of bank accounts amounts to harassment, says Chinese firm ByteDance

ByteDance has told an Indian court that a government freeze on its bank accounts in a probe of possible tax evasion amounts to harassment and was done illegally, according to a filing seen by Reuters.

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.

An Indian tax intelligence unit in mid-March ordered HSBC and Citibank in Mumbai to freeze bank accounts of ByteDance India as it probed some of the unit`s financial dealings. ByteDance has challenged the freeze on the four accounts in a Mumbai court.

None of ByteDance India`s employees have been paid their March salaries due to the account freeze, said two people familiar with the matter. The company told the court it has a workforce of 1,335, including outsourced personnel.

In the 209-page court filing lodged on March 25, ByteDance told the High Court in Mumbai the authorities acted against the company without any material evidence and gave no prior notice, as required by Indian law, before such "drastic action".

Blocking accounts "during the process of investigation amounts (to) applying undue coercion," ByteDance argued. It is "intended, improperly, to harass the petitioner."

India`s Directorate General of Goods & Services Tax Intelligence, and the finance ministry which oversees it, did not immediately respond to requests for comment over the weekend.

The details of the tax investigation have not previously been reported. The tax agency told ByteDance last year it had reasons to believe the company suppressed certain transactions and claimed excessive tax credits, the filing shows.

ByteDance declined to comment on its court filing but told Reuters on Tuesday it disagrees with the decision of the tax authority. HSBC declined to comment, while Citibank did not respond.

ADVERTISING, OTHER DEALS SCRUTINISED

The court declined to grant ByteDance immediate relief in a brief hearing on Wednesday. The next hearing is scheduled for Tuesday.

The investigation centres on potential evasion of taxes related to online advertising and other financial dealings between ByteDance India and its parent entity in Singapore, TikTok Pte Ltd. TikTok did not respond to an email seeking comment.

ByteDance told the court its India workforce includes 800 people working in its "trust and safety" team that supports activities like content moderation overseas.

The company has "robust business plans in India and is not contemplating winding up," it said, urging the court to lift the freeze on the accounts.

The tax agency started investigating the company in July. It inspected documents at the company`s office and summoned and questioned at least three executives, the filing says. Authorities also asked ByteDance to submit documents, including invoices and agreements signed with some clients.

ByteDance representatives "appeared multiple times" before tax officers and provided documents, the filing says.

TikTok, one of India`s most popular video apps before it was banned, has faced scrutiny around the world.

Under then-President Donald Trump, the United States alleged the app posed national security concerns. The new administration of Joe Biden has paused a government lawsuit that could have resulted in a de facto ban on TikTok`s use there.