On December 21, the I-T department conducted country-wide search and seizure operations on certain foreign-controlled mobile communication and mobile handset manufacturing companies, and people linked to them.
Several premises in Karnataka, Tamil Nadu, Assam, West Bengal, Andhra Pradesh, Madhya Pradesh, Gujarat, Maharashtra, Bihar, Rajasthan, Delhi and NCR were covered in the operation.
“The search 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 over Rs 5,500 crore. The claim of such expenses does not seem to be appropriate in light of the facts and evidence gathered during the search,” the I-T department said without naming the Chinese mobile manufacturers but sources confirmed the names.
Xiaomi and Oppo did not comment on the issue.
“The search operation has also brought out the modus operandi of purchase of the components for manufacturing of mobile handsets. It is gathered that both 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 1,000 crore,” the tax department said, adding: “Evidence with regard to the inflation of expenses, payments on behalf of the associated enterprises, etc. have also been noticed…”