Restaurants Show Losses in India to Evade Tax, Open Branches Abroad

As regards to Anjappar, the I-T department has found that apart from evading income tax on profits earned abroad, the hotel chain had also suppressed its income from local outlets.
  • Franchise India Team Editor
Restaurant India

The Income Tax department has revealed a new model adopted by restaurant chains in Chennai to evade tax. The I-T sleuths took the lid off the tax evasion plot during three days of searches conducted on 32 premises of four restaurant chains in Chennai last week

The I-T officials found that the restaurant chains were showing losses in India operations. They ran branches and franchisee outlets abroad without even opening an office or appointing a manager there. Though profits from such outlets are taxable in India, the promoters were diverting funds and not paying any tax, said a senior I-T investigation official.

The owner of a chain of restaurants in Chennai is the main link in the tax evasion network, said the official. He is expected to appear before tax officials in a few days. So far, the sleuths have detected 142 crore unaccounted income in various restaurant groups, said the official. Efforts to contact the owner failed as both the mobile numbers were not reachable.

The searches were conducted at the offices and residences of promoters of Saravana Bhavan, Hot Breads, Grand Sweets and Snacks and Anjappar from January 3 to 5. In 2013, too, the I-T department had searched Saravana Bhavan chain of restaurants.

“As per the I-T Act, if directors or owners of a business establishment are Indian citizens residing in the country, they have to pay income tax on their income both within the country and abroad. In all these cases, the owners are Indian residents,” pointed the officials.

As regards to Anjappar, the I-T department has found that apart from evading income tax on profits earned abroad, the hotel chain had also suppressed its income from local outlets.

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