China-based Huawei gets partial relief from ITAT

Mumbai, Apr 4, 2023

Synopsis
Huawei India has been under the scanner of the IT for alleged tax evasion. The department has accused the company of sending over ₹700 crores to its parent in China as dividend, thereby reducing the tax liability.

Granting partial relief to China-based Huawei Technologies, the income tax appellate tribunal (ITAT) recently held Huawei Telecommunications (India) Company Private Limited (Huawei India) as its fixed place permanent establishment (PE) and hence liable to pay tax from the provision of technical services to the Indian entity.

However, ITAT did not allow the department's tax demand on royalty payment.

Huawei India has been under the scanner of the IT for alleged tax evasion. The department has accused the company of sending over ₹700 crores to its parent in China as dividend, thereby reducing the tax liability.

The case pertains to assessment year 2018-19. The Assessing Officer (AO) had concluded that Huawei India constitutes a fixed place PE, installation PE, service PE and dependent agent PE. Thus, the entire revenue on account of supply of equipment and handsets is through business connection in India and has taken place through the PEs in India, so effectively connected to the PE.

The department also argued that similar relief was sought by the company for previous assessment years. The tribunal ruled in the favour of the revenue (IT department)

"...As far as the material facts relating to the existence of PE and attribution of profit are concerned, they are more or less identical to past assessment years ...There is no difference in the factual position permeating through different assessment years..." the Delhi bench of ITAT said in its order reviewed by the ET.

Responding to ET's query, spokesperson for Huawei said, "As a responsible company operating for over two decades in India, we have always ensured that our operations are fully compliant with the laws of the land. We have consistently cooperated with the Government of India, for all aspects of the ongoing investigations," the statement read.

"The ITAT matter is sub judice and therefore it is not appropriate for us to make any comment on it," the statement added.

[The Economic Times]