Xiaomi declined to comment, citing ongoing court cases. Jain and Rao did not respond to Reuters` requests for comment. Management issued an order two days later to freeze assets in Xiaomi`s bank accounts. Xiaomi said Xiaomi India is a subsidiary and one of the Xiaomi Group companies that has entered into a legal agreement with Qualcomm Group (US) to license intellectual property for the manufacture of smartphones. The statement added that Xiaomi and Qualcomm “believe it is a legitimate business agreement for Xiaomi India to pay royalties to Qualcomm.” Xiaomi says payments are for standard essential patents (SEP) and IP addresses used in our “Indian version of smartphones”. An Indian appellate authority on Friday upheld an order issued in April by India`s federal financial crime agency, the Directorate of Law Enforcement, to seize 55.51 billion rupees, saying an investigation had found Xiaomi had made illegal transfers to foreign companies by issuing them in the form of royalty payments. In response to a tweet from South Asia Index that moves its business to Pakistan “wrongly and for no reason” amid legal complications, Xiaomi said the reports were unfounded and its brand was a successful example of Make in India`s journey, as 99% of its smartphones and 100% of our TVs are made in India. The company said Xiaomi India is a subsidiary and one of the Xiaomi Group companies that have entered into a legal agreement with Qualcomm to grant an IP license for the manufacture of smartphones. It seized $725 million (about Rs 5,624 crore) from Xiaomi`s local bank accounts, although an Indian court stayed that decision after a legal challenge from Xiaomi. India`s financial crime agency, the Directorate of Law Enforcement, has been investigating Xiaomi since February. On April 30, the agency said the smartphone maker had illegally transferred funds overseas to three companies, including one of a Xiaomi group company, “under the guise of royalties.” The Law Enforcement Directorate seized the banking assets of Xiaomi Technology India Private Limited last week, saying it had discovered that the company had illegally transferred funds to three foreign-based companies, including a Xiaomi Group company, “under the guise of royalties.” A week after carrying out the raids, the Directorate of Tax Intelligence (DRI) issued three Showcause notices to Xiaomi India claiming and collecting duties amounting to Rs 653 crore. The DRI said in its statement that Xiaomi India escapes tariffs due to undervaluation. Xiaomi India has issued a detailed statement on assets worth Rs 5,551.27 crore seized by the Foreign Exchange Management Act (FEMA) authority, claiming that nearly 84% of the same sum will be paid to Qualcomm in the form of royalties.
Xiaomi`s assets were seized for alleged violations of foreign exchange regulations, with the ED claiming that the company had transferred large sums of money to affiliates in the name of royalties without actually using their services. ED had also interviewed Xiaomi`s global vice president, Manu Kumar Jain, and former Indian business leaders on the issue. Xiaomi was one of nine companies designated CCMC on January 14, 2021. Xiaomi filed a lawsuit on January 29, 2021 for its inclusion against the Department of Defense and its Secretary, the Treasury and the Secretary of the United States, and the President of the United States in District Court (Xiaomi Corporation v. U.S. Department of Defense et al., complaint; Civil File No. 21-cv-00280). 12.
In March 2021, Judge Contreras issued a preliminary order ordering the implementation and enforcement of the bans against Xiaomi, against which the US government has not appealed. Instead, the DoD indicated it would settle the lawsuit and remove Xiaomi from the CCMC list. Tax inspectors raided Xiaomi`s offices in India in December. After receiving information from tax authorities, the DE, which investigates issues such as violations of the foreign exchange law, began reviewing Xiaomi`s license fees, according to court documents. Chinese consumer electronics company Xiaomi Technology India Private Limited is back in the news. The company, which is one of the leaders in the Indian smartphone market, had taken the spotlight to offer popular and affordable smartphones and top-notch hardware at the best prices. But the company has also attracted the attention of the Indian government due to legal complications. The ED announced on April 30 that it had seized Xiaomi India`s assets worth more than 5.5 trillion rupees, saying the smartphone maker had made illegal transfers to foreign companies, showing them as royalties. Xiaomi has been under investigation since February, and last week the Indian agency seized $725 million from the company`s Indian bank accounts, claiming to have made illegal transfers abroad “under the guise of royalties.” With legal battles escalating, there were rumors that the company might move its base to Pakistan. Chinese smartphone giant Xiaomi is facing legal headaches in India as a federal financial crime agency and tax authorities investigate its business practices.
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