The Huawei Research and Development Center in Bangalore, India. Photo: AFP

Chinese telecom major Huawei is facing scrutiny by tax authorities in India, according to various reports. The income tax department has found alleged manipulation of account books for reducing taxable income in India, the Press Trust of India reported.

The searches were reportedly conducted on February 15 at the main business and residential premises of “key office bearers” of a multi-national group, engaged in the distribution of telecom products, the Central Board of Direct Taxes, the policy-making body for the tax department, said in a statement.

It alleged the group “manipulated its books of account to reduce its taxable income in India through the creation of various provisions for expenses … which have little or no scientific/financial rationale.”

Huawei’s offices in Bangalore, Delhi and Gurugram were raided as part of the investigation.

The board alleged the group failed to provide “any substantial and appropriate justification for such claims.” It made multiple charges against the company including that it “made inflated payments against receipt of technical services from its related parties outside India.”

Tax investigators alleged that suppression of income of 4 billion rupees (US$52.6 million) has been detected.

The Chinese company said it was “firmly compliant” with Indian laws. “Huawei is confident our operations in India are firmly compliant to 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 said in a statement.

Though Huawei is a prominent telecom gear maker, the Indian government has kept Chinese companies out of trials for 5G services, citing security risks and worsening Sino-Indian ties.

However, telecom operators have been allowed to source telecom gear from Huawei and ZTE under their old agreements for maintaining their networks.

But for new business agreements, they will need approval from the government. Last year the Indian telecommunications department amended the license conditions, mandating service providers procure telecom equipment only from ‘trusted sources’ as defined by the government, and barred Chinese companies from new projects.

However, despite these setbacks, Huawei’s Vice-President for the Asia-Pacific region Jay Chen sees India as a great opportunity in the information and communications technology market. At a recent media conference, he expressed confidence about the Indian market and hoped the current situation might change.