Last year, Chinese phone-maker Xiaomi's premises were raided by Indian income tax sleuths and the company was slapped a tax notice for Rs 653 crore (roughly $87 million) for alleged non-payment of royalty and licence fee in the value of its imports. Now another Chinese telecom gear maker Huawei is facing the fire for similar alleged tax fraud.
The Indian tax officials have put out an official statement on conducting search & seizure operations on a multinational group, "engaged in distribution of telecom products and providing captive software development services". The searches, which were spread across Delhi, Gurugram and Bengaluru, covered the main business premises and also the residential premises of the key office bearers.
Though Huawei has not been specifically named by the government, official sources off the record have confirmed it to be the Chinese telecom supplier company.
- Huawei says it refuses to ‘retreat from the international market’
- Xiaomi pulled up by Chinese authorities for false representations on a handset
The case against Huawei
The official statement from the government said that the raids revealed that the group has made inflated payments against receipt of technical services from its related parties outside India. The company could not justify the genuineness of obtaining of such alleged technical services, the government said and added Rs 129 crore was debited over a period of five years for such services.
It also found that the company has debited more than Rs 350 crore in its books in recent financial years towards royalty to its related party. "During the search, the group has failed to substantiate receipt of any such services/technical know-how, or the basis of quantification of royalty rate for such claim."
Evidences gathered and statements recorded during the search also reveal that one of the group entities engaged in providing software development services, has been disclosing lower net margins from the related parties, the government alleged. "On this aspect, suppression of income of Rs 400 crore has been detected," it added
The search action also further revealed more account manipulations. More investigations are underway.
Huawei, for its part, said that it is "confident our operations in India are firmly compliant to all laws and regulations. We will approach related government departments for more information and fully cooperate as per the rules and regulations and follow the right procedure".
Xiaomi, too, it may be recalled, made similar responses. But nothing seems to have come out of it.
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