Huawei India sent huge sums to parent even as revenue fell, says tax dept

The Income Tax Department has accused an Indian unit of Chinese technology company Huawei of repatriating large amounts to the parent in the form of dividends, reducing its taxable income here.

Claiming discrepancies in the income declared by Huawei Telecommunications India for at least two financial years, the department said the company had repatriated ₹750 crore "even when its revenue was reducing drastically".

The tax department had frozen the bank accounts of the company in February, after conducting a search operation in its premises and accusing it of tax evasion.


The Delhi High Court in April stayed the attachment of the accounts on Huawei's plea and sought the department's response. The department detailed the charges against the company in its response filed earlier this week, which ET has seen.

Huawei had denied any wrongdoing and claimed in its petition to the court that the attachment of the accounts, without giving any notice, had affected its business.

I-T: Have 'Incriminating Material' Against Co
In its affidavit justifying the attachment, the tax department described Huawei's petition as "a ploy raised on frivolous grounds just to obstruct departmental proceedings and to avoid consequential payment of taxes". The department also claimed it had in possession "incriminating material" against the company.

Huawei is one of the Chinese companies whose activities in India are under strict scrutiny. Companies like smartphone manufacturers Vivo and Xiaomi and some entities linked to them are also under the lens of Indian investigators including the Enforcement Directorate that probes money laundering.

The tax department said the Huawei unit had not produced its books of accounts "till date", making it "impossible to ascertain the veracity of the income declared by the company".

Instead, it merely provided a dump of "transaction level details as downloaded from their ERP accounting system" which "cannot be said to be the books of accounts of the company". Even these didn't tally with the final financials of the company for 2016-17 and 2017-18, it alleged.

The department said Huawei India did not give it access to the email of Yang Yi, the chief financial officer who was the decision-making authority on transfer-pricing issues. It is imperative to examine the communications to understand the full import of the financial transactions and the reasoning behind them, it said. But the request was denied on the ground that the email could have data unrelated to the company, it said.

The affidavit said key financials such as the registers of sales/purchase and inventory were submitted only after the department conducted the search operation in February.

Also, efforts to get "meaningful details" on the books of accounts from various key personnel were "stonewalled" by the company "under a design to thwart lawful investigations", it said. The executives told the officials that relevant details sought would take "up to six weeks", it added.