The Enforcement Directorate has rejected claims by Xiaomi Technology India Private Limited, the Indian arm of the Chinese cell phone maker Xiaomi, that royalty payments to the tune of Rs 5,500 crore made by Xiaomi India to three foreign firms since 2016 had been found to be legal by the Income Tax Department in India. The ED has also disputed claims that the Rs 5,500 crore transferred out of India since 2016 were royalty payments since the contracts for technology royalties are signed by Xiaomi Hong Kong and not Xiaomi India — a seller of Xiaomi phones. The ED's stand emerged in the course of a hearing of a petition filed in the Karnataka High Court by Xiaomi Technology India Private Limited against an ED move of April 29, 2002, for seizure of bank accounts of Xiaomi Technology India Pvt Ltd on the grounds that royalty payments to the tune of over Rs 5,500 crore to foreign accounts made by the firm since 2016 were in violation of the Foreign Exchange Management Act, 1999. Xiaomi India approached the Karnataka HC last month, stating that technology royalty paid to three foreign companies was not in contravention of the FEMA law.
