By Abhirup Roy and Aditya Kalra
MUMBAI (Reuters) - An Indian court on Tuesday said China's ByteDance must deposit around $11 million that authorities believe the company owes in an alleged case of tax evasion, a decision the government said bars the firm from using existing bank funds for other purposes.
An Indian tax intelligence agency in mid-March ordered HSBC and Citibank in Mumbai to freeze accounts of ByteDance India as it investigated some of the firm's financial dealings. ByteDance challenged the move in court saying the freeze amounted to harassment and was done illegally.
ByteDance, owner of the TikTok video app, has said in court it does not owe the tax government is demanding and does not agree with the tax authority's decision to freeze its accounts.
After a government counsel said ByteDance owed the authorities about 790 million rupees ($11 million), the High Court in Mumbai said the company will need to keep that amount blocked in a state-run bank.
That amount will be frozen, the two-judge bench said.
However, the four blocked bank accounts of ByteDance held only $10 million in funds, according to its court filing.
A counsel for the federal tax authority, Jitendra Mishra, told Reuters ByteDance can use the $10 million for making the court mandated deposit, but cannot use it for any other activity. Effectively, Mishra said, the accounts remain frozen until the amount is moved to the state-run bank.
ByteDance in a statement said the court had agreed with the company that its accounts "should be unblocked" and that will allow it to continue operations. "We are prepared to take further steps required by the court and are confident in our position on this tax matter," it said.
ByteDance did not comment on government counsel Mishra's statement and it is unclear how the company will deposit the amount ordered by court while also funding operations.
ByteDance in January reduced its Indian workforce after New Delhi maintained a ban on 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.
The company has told the court it still has an Indian workforce of 1,335, including outsourced personnel, which includes 800 people working in its "trust and safety" team that supports activities like content moderation overseas.
In the tax probe, which started in July 2020, India's tax authority told ByteDance it had reasons to believe the company suppressed certain transactions and claimed excessive tax credits, Reuters has previously reported.
(Reporting by Abhirup Roy in Mumbai and Aditya Kalra in New Delhi; Editing by Sanjeev Miglani, David Evans and Barbara Lewis)