IT Department Says 2 Mobile Phone Companies Sent 5,500 Crore Yen In Remittance, Which Seems Inappropriate
The Income Tax Department said on Friday it carried out India-wide search and seizure on some foreign mobile phone manufacturing companies and associated persons on December 21, and found that two large companies had made remittances in the form of royalties of more than 5,500 crore, to and on behalf of its group companies located abroad.
The claim for such expenses does not appear appropriate in light of the facts and evidence gathered during the investigation, he said in a statement without naming the companies.
Various premises in Karnataka, Tamil Nadu, Assam, West Bengal, Andhra Pradesh, Madhya Pradesh, Gujarat, Maharashtra, Bihar, Rajasthan, Delhi and the NCR were covered by action, he said.
“The research operation also brought out the procedure for purchasing components for the manufacture of mobile phones. It is understood that these two companies did not comply with the regulatory mandate prescribed by the Income Tax Act 1961 ”, he said, adding that such failure makes them liable to a criminal action in excess of 1,000 crores, under the Income Act. tax law, 1961.
Mobile phone companies such as Oppo, Xiaomi and One Plus have reportedly been covered by the research.
“The research has brought to light another modus operandi whereby foreign funds have been introduced into the books of Indian society, but the sources of funds are questionable in nature, allegedly without creditworthiness. The amount of these loans is around 5,000 crore, on which interest charges have also been claimed, ”he added.
Evidence regarding the inflation of expenses and payments on behalf of associated companies was also observed, which led to the reduction in taxable profits of the Indian mobile phone manufacturing company. Such an amount could exceed 1,400 crore yen, the IT department said.
It is further noted that one of the companies used the services of another entity located in India but did not comply with the withholding tax provisions. The amount of TDS liability on this account could be around 300 crore.
In the case of another company, the ministry said it was detected that control of the company’s affairs was largely managed from a neighboring country. “Evidence has been gathered of an attempt to transfer all of the company’s 42 crore yen reserves out of India without paying taxes owed,” he said.
The investigation of some financial and software services companies revealed that a number of these companies were formed with the aim of inflating expenses and siphoning funds.
To this end, these companies made payments for unrelated business purposes, as well as invoices issued by a non-existent trading company based in Tamil Nadu. The quantum of such flow turns out to be around ₹ 50 crore. Other investigations are underway, he added.