Bengaluru-based healthtech startup Practo is reportedly undergoing a tax probe. As per a recent report, the company is being investigated by the Income tax authorities for tax evasion through a cross-border corporate restructuring.
As per the same report, the Bengaluru office of the Income Tax Department has summoned Practo officials to explain discrepancies in valuations, that seem to have fluctuated within a short period of time in 2014.
Tax Evasion Allegations – Difference In Valuation
The report further states that a ‘lower valuation was used in calculating capital gains tax owed on the transfer of assets to an offshore affiliate in Singapore.’
The company office in Bengaluru was even searched in May 2017. And the Tax authorities seized a few company records, as per a source familiar with the investigation.
The report further mentions that healthtech startup had engaged a Bengaluru-based accounting firm to carry out an independent valuation of its intellectual property in August 2014. The company’s assets, comprising its website, domain name, software codes, and trademarks were sold to Singapore-based Practo Pte Ltd for $600K in August 2014.
However, just a year later in August 2015, Practo raised over $90 Mn in its Series C round, at a valuation of $500 Mn. The round was led by Tencent, Sofina & Others. The Series C round came just a few months after Practo had raised $30 Mn in its Series B round from Sequoia India and Matrix Partners.