Bengaluru, Dec 22 (IANS): In a major relief to Xiaomi Technology India, the Karnataka High Court has quashed the Income Tax department's order of attaching Rs 3,700 crore fixed deposit amount in a tax evasion case against the company.

In its recent order, the court has restrained Xiaomi Technology from making any payments from Rs 3,700 crore FDs to firms outside India. It has also ordered the Income Tax department to complete draft assessment proceedings before March 31.

A bench headed by Justice S.R. Krishna Kumar stated that the company is allowed to take overdrafts against the FD accounts and make payments.

The bench underlined that the principal commissioner's consent reflects complete non-application of mind. It is a non-speaking and unreasoned approval which is contrary to law. The IT department has only stated that it is necessary to attach FDs to protect revenue interest and no other reasons mentioned. The impugned order based on the approval needs to be quashed, the bench said.

The IT department argued that the petitioner alleged of defrauding respondents and not paying taxes by moving funds outside India should not be given any relief.