Xiaomi, Oppo could face Rs 1,000 crore fine for violating law: Income Tax Dept

New Delhi: China-based smartphone brands such as Xiaomi and Oppo could soon face a fine worth Rs 1000 for violating tax laws, according to the latest Income Tax department notific. The department had last week raided several offices of the smartphone makers and their third-party manufacturers in India. 

The income tax department pointed out that the firms inflated their expenses in a bid to lower their taxable profits of more than Rs 1,400 crore. The department had conducted its searches in 11 states including Delhi, Karnataka, Tamil Nadu, Gujarat and Rajasthan, among others. 

In the official statement put forward today, December 31, the Income Tax Department said that the search action revealed that two major companies - Xiaomi and Oppo - made remittances in form of royalty, to and on behalf of the group companies located abroad, which aggregates to more than Rs 5,500 crore.

"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 Income Tax department’s statement added.

Dubious sources of funds

The Income Tax department also said that the source of the foreign funds received by the company is also doubtful. The agency said that the search has brought to fore another modus operandi whereby foreign funds have been 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 creditworthiness of the lender," the department added. Also Read: Deadline for submission of life certificate for pensioners extended; check last date

According to the department, the "quantum of such borrowings" is close to Rs 5,000 crore. The agency pointed out that the firms have also claimed interest expenses on the borrowings. Also Read: Meta Compliance Report: Facebook took action on 16.2 million content pieces in India in November

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