The department has also found TDS liability of Rs 300 crores on one of the companies, along with the detection that the control of the affairs of the company was substantively managed from a neighboring country
Following a pan-India raid by the Income Tax department, Chinese smartphone companies Oppo and Xiaomi are said to be liable to be fined Rs 1,000 crore for violating the law pertaining to non-disclosure of related party transactions.
The IT department said in an official statement, “The search action has revealed that two major companies have made remittance in the nature of royalty, to and on behalf of its group companies located abroad, which aggregates to more than Rs 5,500 crore.”
The IT department had carried out a pan-India search and seizure operations on December 21 in the case of certain foreign-controlled mobile communication and mobile handset manufacturing companies and their associated persons.
Although the statement did not mention the two companies explicitly, sources close to the matter have confirmed their involvement.
“The search operation has also brought out the modus operandi of purchase of the components for manufacturing of mobile handsets. It is gathered that both these companies had not complied with the regulatory mandate prescribed under the Income-tax Act, 1961 for disclosure of transactions with associated enterprises. Such lapse makes them liable for penal action under the Income-tax Act, 1961, the quantum of which could be in the range of more than ₹1,000 crore,” the statement further added.
“The Indian directors of the said company admitted that they had no role in the management of the company and lent their names for directorship for namesake purposes. Evidences have been gathered in an attempt to transfer the entire reserves of the company to the tune of Rs.42 crore out of India, without payment of due taxes,” the department said in the statement.
The department’s raid also brought to light alleged bogus borrowings of over Rs 5,000 crore. The department has also found TDS liability of Rs 300 crores on one of the companies, along with the detection that the control of the affairs of the company was substantively managed from a neighboring country.
The department said that it found that one of the companies inflated expenses, payments on behalf of the associated enterprises, which led to the reduction of taxable profits of the Indian mobile handset manufacturing company. “Such an amount could be in excess of Rs.1400 crore.”
