Global vice president of Chinese mobile phone company Xiaomi, Manu Kumar Jain, was unable to appear before the Enforcement Directorate (ED) for questioning on Wednesday and asked for more time to join the investigation.
The Enforcement Directorate has subpoenaed Jain, a former head of Xiaomi’s India unit, in a case related to a violation of the provisions of the Foreign Exchange Management Act (FEMA). ED is investigating this case, which is referred by the Income Tax Authority.
Sources told ANI that Jain has expressed his unavailability to appear before ED today and has asked for more time to participate in the investigation. Now ED will issue a new subpoena for Jain to join the investigation.
Sources said ED is investigating whether the company violated FEMA, as suspected by the Internal Revenue Service.
In December 2021, the Income Tax Administration conducted investigations into Chinese mobile phone companies Xiaomi, Oppo, OnePlus and some other Chinese fintech companies. The searches were conducted at various premises associated with these companies in different parts of the country including Karnataka, Tamil Nadu, Assam, West Bengal, Andhra Pradesh, Madhya Pradesh, Gujarat, Maharashtra, Bihar, Rajasthan and Delhi NCR.
ED sources told ANI that Xiaomi has made remittances in the form of royalties to and on behalf of overseas group companies totaling more than Rs 1,000,000 million.
The assertion of such costs does not appear appropriate in view of the facts and evidence collected. During the investigation, ED found that Xiaomi had failed to comply with the regulatory mandate to disclose affiliate transactions. Such failure makes them liable.
Foreign funds have been introduced to the Indian company’s books, but it turns out that the source of these funds is of dubious nature, allegedly with no creditworthiness of the lender. The amount of such loans is several million rupees, for which interest expenses have also been claimed.
Sources told ANI that evidence was also found relating to inflation in spending and payments on behalf of related companies, which reduced the Indian mobile phone maker’s taxable profits.