The Income Tax Department said Friday it had conducted pan-India search and seizure operations against several “foreign controlled” mobile communication and handset companies for tax evasion by inflating expenses and not revealing remittance in nature of royalty.
The operations took place on December 21 across 11 states — Karnataka, Tamil Nadu, Assam, West Bengal, Andhra Pradesh, Madhya Pradesh, Gujarat, Maharashtra, Bihar, Rajasthan, Delhi, and some parts of NCR. “The search action has revealed that two major companies have made remittance in the nature of royalty, to and on behalf of its group companies location abroad, which aggregates to more than Rs 5,500 crore. The claim of such expenses does not seem to be appropriate in light of the facts and evidence gathered during the search action,” the I-T Department said in a release.
It also found that the companies borrowed foreign funds of up to Rs 5,000 crore, without following due process, the source of which were doubtful, with “no credit worthiness” of the lenders.
Apart from this, the companies also indulged in inflation of expenses, which led to reduction of taxable profile to the quantum of Rs 1,400 crore. One of these companies, the department said, used the services of a company located in India but did not comply with the provisions of tax deduction at source (TDS), with the total liability of TDS not deducted amounting to up to Rs 300 crore.
