Bombay High Court grants relief to TikTok subsidiary ByteDance in plea to de-freeze bank accounts in tax liability case

The Bombay High Court on Tuesday allowed ByteDance (India), a subsidiary of TikTok, to operate its bank accounts in HSBC and Citibank after depositing the dues allegedly owed by the company to the Goods and Services Tax (GST) authorities..The Bench of Justices SP Deshmukh and Abhay Ahuja granted relief in the Chinese company's plea seeking a direction to de-freeze its bank accounts containing Rs. 60 crore. The authorities had earlier passed a provisional attachment order freezing the company's accounts for failure to pay dues worth Rs 78.91 crore..After India banned the popular video app TikTok, Bytedance cut its workforce in India. The plea stated that despite this, it has over 800 employees working for operations overseas, including work on activities such as content moderation. It claimed that the provisional order and "illegal" freezing of its bank accounts amounted to harassment..Appearing for ByteDance, Senior Advocates Rafiq Dada and Vikram Nankani argued that "it was a distressing situation for the company" as it had to disburse salaries and medical and general insurance of over 800 employees..Dada apprised the Court that the proceedings before the tax authorities had been going on for two years now, during which time the company had been co-operating by handing over everything including their account statements. Despite this, the company's accounts were frozen..The Senior Counsel contended that all of ByteDance's bank accounts were frozen by the authorities due to the company's connection with TikTok. "I can deal with law, I cannot deal with prejudice," he remarked..Dada's contentions were two fold: Bytedance is not a "fly-by-night" company which will not co-operate with the investigation if a show cause notice is issued to it.Assuming the Commissioner of GST passes an order against the company, in the appeal assailing the order of the Commissioner, there is a statutory requirement of depositing only 10% of the amount due by the company.In view of the above, the amount which is seized by the GST department is above the statutory requirement, he argued..Dada further contended that ByteDance had previously paid taxes in crores of rupees. "Salaries worth over Rs 11 crore has to be given. Provident Fund and medical insurance has to be paid, which is totalling around Rs 35 crore. The main part is the rent. What will I do if I am evicted? I have more than Rs 60 crore in both the accounts," he added..Senior Advocate Pradeep Jetley along with Advocate Jitendra Mishra, appearing for the GST authorities, opposed the plea, stating that no interference was warranted from the Court at this stage..Jetley submitted that all the contentions which the company had raised could be raised before the GST authorities..He added that on account of the ban against Chinese mobile applications like TikTok in India, ByteDance's business had suffered. He added that from the investigation being conducted, it was deduced that there was no scope for revival of the company..The tax authorities were apprehensive that the due to failing business, "the company will run away". Hence, the freezing of the ByteDance's bank accounts was only to safeguard the interests of the tax authorities. "The company has already announced the closure of its operations. Procedure has been followed by GST authorities. We have carried out investigations, we have recorded statements. This calls for no intervention," Jetley argued..Before closing the arguments, Dada suggested that 50% of the total amount frozen could be released for the purpose of disbursement in the manner the Court directs, and the remaining 50% could remain frozen or deposited with the Court. He prayed for his request to be considered stating, "they say that the company will run away but this action of theirs will certainly drive the company away.".After a lengthy hearing, the Court directed ByteDance to deposit the dues amounting to Rs. 78.91 crore in a fixed deposit account of a nationalised bank, after which the frozen accounts could be operated.."We are pleased that the Hon'ble High Court agreed with us that our bank accounts in India should be unblocked. This decision in turn allows us to continue carrying out our operations in India and looking after our employees. We are prepared to take further steps required by the court and are confident in our position on this tax matter," ByteDance spokesperson said in a press statement.