Mobile phone makers Xiaomi and Oppo could be fined more than Rs 1,000 crore for violating tax laws. The Income-tax department on December 21 launched a search and seizure operation in India against the companies manufacturing these foreign mobile communications and mobile handsets and their affiliates.
Apart from Gujarat, the Income Tax Department conducted search operations in states including Karnataka, Tamil Nadu, Assam, West Bengal, Andhra Pradesh, Madhya Pradesh, Maharashtra, Bihar, Rajasthan, Delhi and NCR.
The Income-tax department's proceedings have revealed that the two companies have paid more than Rs 5,500 crore in royalties to their group companies abroad. The revelations came after facts and evidence gathered during the search operation. The search operation also revealed the procedure for purchasing spare parts for mobile handset manufacturing.
In which it has been noticed that both the companies have not complied with the order prescribed under the Income Tax Act, 1961 in their dealings with the respective industries. Following this negligence, a fine of over Rs.1000 crore could be levied on both the companies for penal action under the Income-tax Act, 1961.
Income tax department proceedings have come up against one more procedure which shows foreign funds in the books of an Indian company but the reality is that the source from which such funds have been received is doubtful. Allegedly the debtor has no credit worthiness. The amount of such generosity is approximately Rs.5000 crore on which interest expenses have also been claimed.
It also turned out that one company used the services of another organization in India but did not comply with the source deduction provision which was implemented from 1-4-2015. A search of some fintech and software services companies revealed that many companies were set up to increase costs and send funds out of India.
