CBDT Accuses Huawei Of Tax Evasion In India, Says Report

The tax department claimed suppressed income of Rs 400 crore has been detected, Huawei manipulated account books to reduce its taxable income

New Delhi: Chinese telecom major Huawei has been accused of tax evasion by the income tax (I-T) department by manipulating its account books in India, quoting sources the PTI reported on Thursday.

An investigation has found that the Chinese telecom firm manipulated account books to reduce its taxable income. The search and seizure operations by the I-T department were conducted on February 15, 2022, with the probe still in progress.

In a statement the CBDT said, “The searches were conducted at the main business and residential premises of ‘key office bearers’ of a multi-national group, engaged in distribution of telecom products and providing captive software development services.”

According to the report, sources identified the company as Huawei.

“The ultimate shareholding of the group lies with a foreign entity of a neighbouring country,” the statement issued by the CBDT said, adding that 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.

The CBDT alleged, “During the probe, the group has failed to provide any substantial and appropriate justification for such claims.”

Huawei, however, during the searches had said it was “firmly compliant” with Indian laws. The company said, “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 according to the rules and regulations and follow the right procedure.”

The CBDT has made multiple charges against the company, including that it “made inflated payments against receipt of technical services from its related parties outside India. The assessee firm 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.

It is noted 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, the CBDT said. “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.