Tax laws

Two Chinese phone makers break tax laws, face $ 134 million fine, India News News

Two Chinese smartphone makers operating in India could be fined 10 billion rupees (around $ 134 million) for violating a tax law relating to the non-disclosure of transactions with associated companies.

On December 21, the Income Tax Department conducted search and seizure operations across India after receiving intelligence regarding certain foreign-controlled mobile communication and mobile phone manufacturing companies and their persons. associated.

Several premises in Karnataka, Tamil Nadu, Assam, West Bengal, Andhra Pradesh, Madhya Pradesh, Gujarat, Maharashtra, Bihar, Rajasthan and NCR Delhi were covered.

“The research revealed that two large companies made royalty payments to and on behalf of its group companies located overseas, amounting to more than Rs.5,500 crore. The claim for such expenses does not seem appropriate in light of the facts and evidence gathered during the search, ”the IT department said in a statement without naming the Chinese cellphone makers, but the media confirmed the names Xiaomi and Oppo.

“It is understood that these two companies did not comply with the regulatory mandate prescribed by the Income Tax Act 1961 for the disclosure of transactions with associated companies. Such failure renders them liable to criminal prosecution under the Income Tax Act 1961, the amount of which could be in the order of over 1,000 crore rupees (approximately $ 134 million) ”, added the statement from the CBDT.

Tax detectives also found that one of the companies was using the services of another entity located in India but did not comply with withholding tax provisions introduced since April 1, 2020, and the amount of liability TDS on this account could be around Rs 3 billion (US $ 42 million).

(With contributions from agencies)