INSUBCONTINENT EXCLUSIVE:
Huawei has been accused of tax evasion, say official sourcesHuawei has been accused of tax evasion with the suppression of 400 crore rupees
in their books, with the investigation still in progress, according to official sources.An investigation has found that China's Huawei
manipulated account books to reduce its taxable income, according to tax officials
The search and seizure operations by the Income Tax Department were conducted on February 15, 2022, with the investigation still in
progress. Although the company's name was not mentioned in the statement released by the Union Finance Ministry, official sources said the
concerned company is the Chinese telecom firm Huawei.India's Ministry of Finance said that a significant telecoms group "failed to provide
any substantial and appropriate justification" on tax claims during income tax raids on its offices in three Indian cities last month.In a
statement released on February 16, Huawei had confirmed the raids
"We have been informed of the visit of the Income Tax team to our office and also of their meeting with some personnel," the company had
said in the statement.According to the Finance Ministry, the search action has revealed that the group has made inflated payments against
receipt of technical services from its related parties outside India."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 said.Evidence gathered, and statements recorded during the search also revealed that one of the group entities engaged in providing
software development services has been disclosing lower net margins from the related parties by claiming its operation to be of low-end
nature."However, the evidence 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," the Finance Ministry said.The search action has further revealed that the group has manipulated its books of
account to reduce its taxable income in India through the creation of various provisions for expenses, such as provisions for obsolescence,
provisions for warranty, doubtful debts/ loans - advances etc., which have little or no scientific/financial rationale.According to the
Finance Ministry, the group has failed to provide any substantial and appropriate justification for such claims during the
investigation.During the search, it was found that the assessee group has debited more than Rs 350 crore in its books of account in recent
financial years towards royalty to its related party
Such expenses have been incurred to use 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 quantifying royalty rate for such claim. Consequently,
rendering services and such royalty payments becomes highly questionable and prima facie, disallowable as business expenses as per extant
