Xiaomi, Oppo could face 1k cr fine for tax violation: IT department | Latest India News

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New Delhi: More than a week after searches were carried out on major Chinese cellphone makers Xiaomi and Oppo, the income tax department said on Friday that the two companies had failed to comply with the regulatory disclosure mandate. transactions and could face ??1,000 crore penalty.

The IT department had conducted India-wide search and seizure operations on December 21 in the case of some foreign-controlled mobile communications and mobile phone manufacturing companies and their associates in Karnataka, Tamil Nadu, Assam, West Bengal, Andhra Pradesh, Madhya Pradesh, Gujarat, Maharashtra, Bihar, Rajasthan and Delhi RCN.

In a statement released on Friday, the Central Commission for Direct Taxes (CBDT), the parent body of the IT department, said: “The research action revealed that two large companies (referring to Oppo and Xiaomi) have carried out payments under the royalty, to and on behalf of its group companies located abroad, which represents more than ??5,500 crores.

“The claim for such expenses does not seem appropriate in light of the facts and evidence gathered during the search,” he said.

“It is understood that these two companies did not comply with the regulatory mandate prescribed by the Income Tax Act 1961 for the disclosure of transactions with associated companies. Such forfeiture makes them liable to criminal prosecution under the Income Tax Act, 1961, the amount of which could be in the order of more than ??1,000 crore, ”the CBDT statement added.

Subsequently, the investigation revealed the modus operandi of purchasing components for the manufacture of mobile phones as well as the introduction of foreign funds into the books of the Indian company, but it turns out that the source of such funds are questionable in nature, allegedly without creditworthiness of the lender. “The amount of these loans is approximately ??5,000 crore, on which interest charges were also claimed, ”he added.

The department added that it had come across evidence regarding inflation in spending, payments on behalf of associated companies, etc., which led to the reduction in taxable profits of the Indian mobile phone manufacturing company. “Such an amount could be greater than ??1,400 crore, ”he added.

Queries to companies went unanswered until the time of going to press.

The tax authorities also found that one of the companies was using the services of another entity located in India but did not comply with the withholding tax provisions introduced since April 1, 2020 and that the amount of TDS liability in this respect could be around ??300 crores.

Another mobile phone company was also raided by IT on December 21, whose name, without disclosing the name, the department said “it was detected that control of the company’s affairs was largely managed. from a neighboring country “.

“The Indian directors of said company admitted that they had no role in the management of the company and lent their names for the post of director for the purposes of the same name. Evidence has been gathered on an attempt to transfer all of the company’s reserves up to ??42 crore outside India with no payment of taxes owed, ”added the CBDT.


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