As per industry sources, Xiaomi and Oppo can be fined Rs 10 billion for violating tax law. The inflated expenses by the two companies led to a reduction of taxable profits of over Rs 14 billion.
As per sources, the searches by the income tax department were carried out at the premises of Xiaomi and Oppo. The income tax department searches were carried out in Delhi and 11 states of Karnataka, Tamil Nadu, Assam, West Bengal, Andhra Pradesh, Madhya Pradesh, Gujarat, Maharashtra, Bihar, and Rajasthan.
Reportedly, the two companies had not complied with the regulatory mandate prescribed under the Income-Tax Act, 1961, for disclosure of transactions with associated enterprises. Such (a) lapse makes them liable for penal action under the Income-Tax Act, 1961, amounting to over Rs 10 billion.
The search revealed that the 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 quantum of such borrowings is about Rs 50 billion, on which interest expenses have also been claimed.
