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I-T Search Detects Rs400cr Tax Evasion at Huawei

The Income Tax department has detected alleged tax evasion of over Rs400 crore during its recent searches at Chinese Telecom company Huawei, linked to payment of royalties to its related parties.
In a statement on Thursday the Central Board of direct Taxes said that a multi-national group, engaged in distribution of telecom products has managed inflated payments against receipt of technical services from its related parties outside India.

While the statement did not name any company, the official sources confirmed that the company in question was Huawei that had been searched by authorities.

Officials said that the group had allegedly debited more than Rs350 crore in its books of account in recent financial years towards royalty to its related party, incurred for the use of brand and technical know-how related intangibles.

Officials claimed that the multinational group failed to substantiate receipt of any such services or technical know-how, or the basis of quantification of royalty rate for such claim.

“Consequently, the rendering of services and such royalty payments become highly questionable and prima facie, disallowable as business expenses as per extant income tax law,” CBDT statement said.

The tax officials have charged the company of making inflated payment s against receipt of technical services from its related parties outside India.

The expenses debited by the company towards receipt of such services are to the tune of Rs 129crore over a period of five years. During investigation, the group has failed to provide any substantial and appropriate justification for such claims. S-ET

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