Following searches across India last week, the Income Tax department announced today that Chinese mobile phone manufacturers Xiaomi and Oppo might face fines of up to Rs 1,000 crore for violating the law.
“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.5500 crore,” the tax department said in a statement today.
The statement further added that “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 Rs 1000 crore.”
Tax raids on Chinese smartphone makers Oppo and Xiaomi in India
It may be recalled that the IT Department had conducted searches on leading Chinese mobile companies across the country on December 21. The searches were conducted in offices of Oppo, Xiaomi, and One Plus in Delhi and 11 states including, Karnataka, Tamil Nadu, Assam, West Bengal, Andhra Pradesh, Madhya Pradesh, Gujarat, Maharashtra, Bihar, Rajasthan.
The Chief Executive Officers of these companies were also covered in this search and interrogated by the Income Tax officials.
“The residential premises of the CFO of one of the assessee firms was searched by the team; other key managerial persons have also been covered during the searches,” a senior official told the Economic Times.
The searches on Wednesday also included some of Oppo’s Chinese distribution partners’ offices.
“One of Oppo’s Chinese distribution partners was recently penalised in hundreds of crores by the ED in Hyderabad,” another person familiar with the matter said.
“As an invested partner in India, we highly respect and abide by the law of the land. We will continue to fully cooperate with authorities concerned as per procedure,” an Oppo India spokesperson said in a statement to the media.
According to reports, the search was carried out based on intelligence reports of massive tax fraud by major Chinese mobile companies. The companies had been under the radar for some time, and when the Income Tax Department received actual evidence of tax evasion, they were raided.
Sources claimed that a large amount of digital data proof pointing to tax evasion had been discovered and seized during the raids.
