The Indian government has discovered Huawei Technologies at the forefront of a tax evasion investigation. According to a new report, the Chinese smartphone maker was found guilty of manipulating books of accounts in order to minimize taxable profits. Reuters quoted an Indian government source in its report.
The Ministry of Finance previously claimed that the telecommunications group failed to account for $52 million in revenue. Furthermore, the $63 million in expenses could not be justified. Government officials raided Huawei’s premises in Gurugram and Bengaluru last month. The officials also looked into the residences of the company’s top executives. There has been no formal confirmation from either the government or the Chinese company.
“The group has failed to substantiate receipt of any such services/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,” the ministry said.
The search also discovered that the group made exaggerated payments in exchange for technical services from associated parties outside of India. The assessee company was unable to justify the validity of acquiring such stated technical services in exchange for which payment was made, as well as the grounds for determining consideration for the same.
According to previous reports, Huawei’s financial records over the last three years were scrutinized. Income tax officials had compiled a list of the company’s affiliated companies, clients, and partners, which contained both global and domestic partners.
Huawei has also been at the focus of concerns in Canada and the United States. The US has also advised that other countries not engage the corporation in their 5G trials. Huawei has also been impacted by trade restrictions enforced by the United States administration on the supply of semiconductors and other components needed in its network equipment and smartphone businesses.
As a result, the Indian government did not involve the smartphone manufacturer on its list of network equipment vendors. The company has repeatedly denied any security concerns. However, telecom providers have been permitted to source telecom hardware from Huawei and ZTE under their existing agreements for network maintenance, but they will need government permission before entering into any new business agreements, according to the National Security Directive on Telecommunication Sector.
The development comes amid rising tensions between India and China following a border dispute between the two countries in 2020. In February, India blocked access to 54 smartphone apps, the majority of which were of Chinese origin, claiming security concerns.