Two of the most popular smartphone manufacturing Companies Xiaomi and Oppo, are likely to face a fine of Rs 1000 crore for not complying with the regulatory mandate prescribed under the Income Tax Act for disclosure of transactions with Associated Companies.
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. On December 21, the I-T department conducted country-wide search and seizure operations on these companies.
The search operation was conducted on several premises in Karnataka, Tamil Nadu, Assam, West Bengal, Andhra Pradesh, Madhya Pradesh, Gujarat, Maharashtra, Bihar, Rajasthan, Delhi and NCR.
What did the Search Operation reveal?
The search has brought to fore another modus operandi whereby foreign funds have been introduced in the books of the Indian company. The source of the foreign funds received by the company is also doubtful with no credit worthiness. 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.
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