Huawei beneath IT lens: ‘manipulated books’ to cut back ‘taxable income’

Pointing to alleged manipulation of account books to cut back taxable revenue in India, the revenue tax division on Thursday stated a multinational group, engaged in distribution of telecom merchandise and offering captive software program improvement companies, inflated funds in opposition to receipt of technical companies from its associated events exterior India. The reference was made for searches and seizure completed on February 15 in opposition to Chinese telecom firm Huawei, an official stated.

Without naming the corporate in its official assertion, the Central Board of Direct Taxes (CBDT) stated the group “manipulated its books of account to reduce its taxable income in India through creation of various provisions for expenses, such as provisions for obsolescence, provisions for warranty, doubtful debts/loans and advances etc., which have little or no scientific/financial rationale”. “During the investigation, the group has failed to provide any substantial and appropriate justification for such claims,” it alleged.

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When contacted by The Indian Express, the Huawei spokesperson didn’t supply any remark.

The firm, throughout the searches, had stated it was firmly compliant with Indian legal guidelines, as per a PTI report. “Huawei is confident our operations in India are firmly compliant to all laws and regulations. We will approach related Government departments for more information and fully cooperate as per the rules and regulations and follow the right procedure,” information company PTI quoted an earlier assertion by the corporate.

The assessee group has debited greater than Rs 350 crore in its books of account in current monetary years in direction of royalty to its associated celebration, the CBDT stated. “The assessee company could not justify the genuineness of obtaining of such alleged technical services in lieu of which payment has been made as also the basis of determination of consideration for the same. The expenses debited by the assessee company towards receipt of such services are to the tune of Rs 129 crore over a period of five years,” it stated.

“Such expenses have been incurred for the use of brand and technical know-how related intangibles. During the search, the group has failed to substantiate receipt of any such services/technical know-how, or the basis of quantification of royalty rate for such claim,” it added.

Evidence gathered and statements recorded throughout the search additionally reveal that one of many group entities allegedly engaged in offering software program improvement companies, has been disclosing decrease web margins from the associated events, by claiming its operation to be of low-end nature. “However, the evidences collected during the investigation indicated that this entity has been rendering significant services/operations of high-end nature. On this aspect, suppression of income of Rs 400 crore has been detected,” it claimed, including that additional investigations are in progress.