Mobile phone makers Xiaomi and Oppo can face a penalty of Rs 1000 crore for violating country’s tax law, the Income Tax department said.
“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 on Friday.
“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 added.
The department said that the search also brought to fore another modus operandi whereby foreign funds were introduced in the books of the Indian company but it transpires that the source from which such funds have been received are of doubtful nature, purportedly with no credit worthiness of the lender. “The quantum of such borrowings is about Rs.5000 crore, on which interest expenses have also been claimed.”
Last week, the IT department carried out pan-India raid at premises of major phone manufacturers in Delhi and 11 states – Karnataka, Tamil Nadu, Assam, West Bengal, Andhra Pradesh, Madhya Pradesh, Gujarat, Maharashtra, Bihar, Rajasthan.