A Single Bench of Karnataka High Court has recently set aside the provisional attachment of the fixed deposits of tech giant Xiaomi India to the tune of Rs. 3700 Crore, in a major relief to Xiaomi Technology India Pvt Ltd.
Xiaomi Technology India Pvt Ltd, the petitioner had to pay royalty to Qualcomm and Beijing Xiaomi mobile software company Ltd., and in relation to the alleged payment of income tax, the
The department issued as show cause notice as to why the payment of royalty to the foreign entity i.e., Qualcomm and Beijing Xiaomi Mobile should not be disallowed. The petitioners filed a detailed reply along with documents and contested the proceedings.
Subsequently, the department passed the impugned order, provisionally attaching the subject fixed deposits of the petitioner in a sum of INR 3,700 crores for a period of six months. The aggrieved assessee-Xiaomi Technology India approached the Karnataka High Court with the present writ petitioner.
The Single Bench of Justice S R Krishna Kumar heard Udaya Holla, counsel appearing for the petitioner and M B Naragund, ASG present for the respondents – revenue.
It was contended by the petitioner that the provisional attachment order is arbitrarily manifested and reflects a pre-mediated conclusion.
The revenue supported the impugned order and submitted that the same does not warrant interference in the present petition which is liable to be rejected.
Both the petitioner and respondent counsel relied on a bunch of decisions to substantiate their claims.
The Bench perused the impugned order and observed that, except for stating that there is likely addition of the amount mentioned in the order, no valid or reasons were presented by the revenue in showing the necessity of attaching the assets of the assessee.
The Court observed that, “mere apprehension that huge tax demands are likely to be raised on completion of assessment is not sufficient for the purpose of passing a provisional attachment order and the exercise of the same must necessarily be preceded by the formation of an opinion that it was necessary to do so for the purpose of protecting the interest of Government revenue”.
In view of the above, partly allowing the appeal, the Karnataka High Court held that the impugned order and attachment was liable to be quashed, subject to the condition that, the petitioner shall not be entitled to make payments from the subject fixed deposits accounts in the form of royalty or in any other form to any companies / entities located outside India.
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