An Indian tax investigation into China's Huawei Technologies has found the telecoms equipment maker manipulated account books to reduce its taxable income in the country, an Indian government source told Reuters on Thursday.

Share Market Live

NSE

Without naming the company, the finance ministry said on Thursday a major multinational telecom group, whose ultimate shareholding "lies with a foreign entity of a neighbouring country", did not account for income of Rs 4 billion ($52 million) in its books, and showed expenses of Rs 4.8 billion that the firm failed to justify.

The revelation made by the Income Tax department came from last month's searches at Huawei's office premises in New Delhi, neighbouring Gurugram and tech hub Bengaluru. The government conducted raids at the residences of its senior executives as well.

"The search action has revealed that the group made inflated payments against receipt of technical services from its related parties outside India. Evidence gathered also revealed that one of the group entities engaged in providing software development services, has been disclosing lower net margins from the related parties, by claiming its operation to be of low-end nature," the income tax department said in a release on Thursday.

"The search action has further revealed that the group has manipulated its books of account to reduce its taxable income in India through creation of various provisions for expenses, such as provisions for obsolescence, provisions for warranty, doubtful debts/ loans & advances etc., which have little or no scientific/financial rationale," the department said.

A Huawei spokesperson in India did not immediately respond to a Reuters' request for comment. After the searches on February 15, Huawei had said the company was "firmly compliant" with the laws in the country.

"We have been informed of the visit of Income Tax team to our office and also of their meeting with some personnel. Huawei is confident our operations in India are firmly compliant with all laws and regulations. We will approach related Government departments for more information and fully cooperate as per the rules and regulations and follow the right procedure," the company had said.

The government said more investigations were in process.

Huawei Asia Pacific Vice President Jay Chen, in a virtual roundtable from Barcelona on Tuesday, had said the company will cover India under all of its initiatives. He was responding to questions around Huawei’s business plans in India under the present situation when the government has kept it out of the 5G business and also not approved it as a trusted source for telecom gear procurement.

”India is a very big market with huge potential and Huawei has a long-term strategy in India. We understand the current situation and it’s possible that sometimes the situation might change. ”Our strategy however remains unchanged and we have our confidence in this market,” Chen said.

(With inputs from Reuters)

First Published:Mar 3, 2022 4:16 PM IST