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Income tax officials showed up at Morris Garages (MG) Motor India’s manufacturing facility in Halol, Gujarat, and its headquarters in Gurugram, according to sources familiar with the development for Fortune India. The officials also confiscated laptops belonging to two managers in Halul. The development comes in light of increased scrutiny by regulators and law enforcement agencies of companies operating in India with Chinese ties. MG Motor is owned by Shanghai Automotive Industry Motor Corporation Limited (SAIC Motor Corp. Limited), a Chinese state-owned automobile manufacturer.

Neither MG Motor India nor the Income Tax Department has issued a statement regarding the matter. Previously, the Ministry of Corporate Affairs (MCA) had reportedly requested an investigation against MG Motor India after some irregularities were discovered in its books. Via the Registrar of Companies (RoC), MCA also summoned the directors of MG Motor India and its auditor Deloitte, seeking clarifications. The company has been under MCA’s radar on various aspects – including alleged tax evasion, billing irregularities, and shady related party transactions.

“We have sent a notice to mainly seek clarification as to why there are operating losses in our annual report for the first year of operations 2019-2020. MG Motor India is a law abiding and professionally managed company that adheres to the highest standards of compliance,” the automaker said at the time in a statement. Automotive industry, it is cooperating fully with law enforcement agencies, and was in the process of providing the “requested records and information” to the DRC within the stipulated deadline.

The automaker also defended the operating losses it reported in its annual report. “It is impossible for any auto company to turn a profit in the first year of its operations. This is due to the huge capital investment required and the long gestation period in a highly competitive market like India where many multinational companies have struggled for decades and the accumulation of losses,” the automaker explained in the statement. .

MG Motors is the latest company to be investigated by law enforcement agencies on allegations of money laundering and tax evasion. An estimate pegs the number of Chinese companies operating in India that fall under the radar at between 400 and 500. Regulatory crackdown has been severe on Chinese smartphone makers Xiaomi Corp., Oppo and VIVO Mobile Communications – with the Enforcement Directorate (ED) launching separate investigations into illegal transfers.

On April 30, ED forfeited Rs. 5,551.27 crore, which was deposited in the bank accounts of Xiaomi Technology India Pvt Ltd. On 5 July, it conducted raids across 48 locations in India regarding alleged money laundering by Vivo and 23 related companies, including Grand Prospect International Telecom Pvt. Ltd. (GPICPL). It claimed that Vivo India had transferred ₹62,476 crore — nearly 50% of its turnover of ₹1,25,185 crore — from India, primarily to China. It further indicated that the transfers in question were allegedly made in order to reveal huge losses in the incorporated Indian companies to avoid paying taxes, as required by law. Around the same time, the Directorate of Revenue Intelligence (DRI) under the Ministry of Finance, also detected duty evasion to the tune of ₹4,389 crore by Oppo Mobiles India Private Ltd.