Previously we reported that the offices of Xiaomi and OPPO Chinese distribution partners were raided by the Income Tax Department on 21 December 2021.  The searches were carried out in Karnataka, Tamil Nadu, Assam, West Bengal, Andhra Pradesh, Madhya Pradesh, Gujarat, Maharashtra, Bihar, and Rajasthan.

Now, according to the Income Tax department, Mobile phone makers Xiaomi and OPPO can be fined ₹ 1,000 crores ($134 million) for violating the law pertaining to non-disclosure of related party transactions(tax evasion).

As per a report by the economic times, The IT department found that two major companies have made payments (remittances) in the nature of royalty, to and on behalf of its group companies located abroad, which aggregates to more than Rs.5500 crore ($738 million).

The IT department stated in its press release that “These 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, the quantum of which could be in the range of more than ₹ 1,000 crores ($134 million).”

One of the companies inflated its expenses by making payments on behalf of the associated enterprises, which led to the reduction of taxable profits of the Indian mobile handset manufacturing company. “Such an amount could be in excess of Rs.1400 crore ($188 million).” revealed the IT department in its press release.

Additionally, the department is also probing the two companies for alleged bogus borrowings of over Rs. 5,000 crore ($671 million). One of the companies utilized the services of another entity located in India but did not comply with the provisions of tax deduction at the source, which leaves them liable for Rs.300 crores ($40 million) in taxes (TDS).

The seized documents and electronics are still under scrutiny by the Income Tax Department as well as the Directorate of Enforcement, so it is still not clear what might become of this situation. But going by the press release of the IT department, Xiaomi and OPPO could potentially face penalties and legal action in the near future for various kinds of tax evasion practices.

RELATED:

• OPPO and Xiaomi Chinese distribution partners raided by income tax department
• Apple puts Foxconn Chennai on “Compliance Watch list” after failing to meet the labor standards
• Apple moves order from Foxconn to Luxshare over $275 billion deal with China: Report

The post Xiaomi and OPPO can be fined ₹1,000 Crore ($134 million) for violating Indian Tax Laws appeared first on Gizmochina.

The offices of Chinese distribution partners of OPPO and Xiaomi are being raided by the Income Tax (IT) department in Mumbai, Delhi, Bangalore, Hyderabad, and Rajkot.

Some sources (via Economic Times) say that the IT department is likely to raid offices of all state-distribution partners of OPPO, with different directorates carrying them out. Offices of such companies including premises of senior executives are being searched, with raids commencing early morning and lasting till the end of the day.

But the IT department isn’t the only one involved in such operations as it’s joined by ED that has also been conducting similar raids. OPPO’s Chinese distribution partner was recently penalized in hundreds of crores by the ED in Hyderabad, a person familiar with the matter said.

It’s likely that the raids are being conducted as a way to convey the government’s stance on the concerned brands, considering that there is no other legal way. For the uninitiated, the Indian government is in a process of stopping OEMs like OPPO and vivo from operating through their Chinese partners and channeling their products through local companies instead.

Currently, OPPO and vivo together command over 25% of the market share in the country, with Xiaomi also holding a major share. The former two are part of BBK Electronics, which is also a parent company of OnePlus and realme. These companies have of late created a layer of Chinese partners to distribute their products in the market, which has caught the attention of Indian officials.

RELATED:

• Alleged OPPO Pad’s key specifications leaked; launch seems imminent
• Oppo patents a Smart Ring, will be another accessory like its Smart Glass
• OPPO Find X4 to be released in February or March, Dimensity 9000 and Snapdragon 8 Gen 1 variants in the cards
• Xiaomi 12 series will capture better images of fast-moving objects, thanks to “breakthrough camera” tech
• Xiaomi 12 gets DisplayMate A+ certificate and sets 15 new records

The post OPPO and Xiaomi Chinese distribution partners raided by income tax department appeared first on Gizmochina.