ByteDance in January cut its Indian workforce after New Delhi maintained a ban on the popular video app TikTok, which was imposed last year after a border clash between India and China, and Beijing has repeatedly criticized India for this and those other Chinese apps.
An Indian tax intelligence unit in mid-March ordered HSBC and Citibank in Mumbai to freeze ByteDance Indias bank accounts While investigating some of the unit’s financial transactions, ByteDance contested the freezing of the four accounts before a Mumbai court.
Two people familiar with the matter said that none of ByteDance Indias employees got paid for the month of March due to the account freeze, the company told the court it has a workforce of 1,335, including outside employees.
In the 209-page court file filed on March 25, ByteDance informed the Mumbai Supreme Court that the authorities acted against the company without any material evidence and did not provide advance notice, as required by Indian law, prior to such a “draconian action”.
ByteDance argued that blocking accounts “during the investigation process amounts to the application of undue coercion”, of “intending, inappropriately, to harass the petitioner.”
The General Directorate of Tax Intelligence for Indian Goods and Services, and the Ministry of Finance that oversees them, did not immediately respond to requests for comment over the weekend.
Details of the tax investigation had not been previously reported, and tax agency ByteDance clarified last year that it had reason to believe the company had canceled certain transactions and demanded excessive tax exemptions, the filing shows.
ByteDance declined to comment on the court file but told Reuters on Tuesday that it did not agree with the IRS decision. HSBC declined to comment while Citibank did not respond.
Other deals were scrutinized, and the court refused to give ByteDance an immediate break at a short hearing last Wednesday, the next session scheduled for next Tuesday.
The investigation focuses on potential tax evasion related to online advertising and other financial transactions between ByteDance India and the parent entity in Singapore, TikTok Pte Ltd, TikTok did not respond to an email requesting comment.
ByteDance told the court that its workforce in India includes 800 people working on the “Trust and Safety” team that supports activities such as overseeing content abroad.
She added that the company has “strong business plans in India and is not considering dissolving them,” and urged the court to lift the account freeze.
The IRS began investigating the company in July. They searched documents in the company’s office and summoned and questioned at least three executives. According to the memo, authorities also asked ByteDance to provide documents, including invoices and agreements signed with some clients.
The filing says that ByteDance representatives “appeared several times” in front of tax officers and presented the documents.
And TikTok, one of Indias most popular video apps before it was banned, is under scrutiny around the world.
Under President Donald Trump at the time, the US claimed that the app was raising national security concerns, the new administration of Joe Biden halted a government lawsuit that could have resulted in an actual ban on TikTok use there.