After Reebok scam, Adidas now under I-T lens

Adidas’ India problems are far from over. Just days after the parent company cried foul over a Rs 870 crore financial fraud at Reebok’s India unit, the income tax department has tightened its noose around Adidas too.

According to a report in the Economic Times, the international tax division of the Central Board of Direct Taxes (CBDT),has asked Adidas to file income-tax returns in India as it reckons that Adidas is generating certain income in India , independent of its subsidiary -Reebok India and Adidas India Marketing - but not paying taxes for it.

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Tax authorities have already sent a notice to Adidas asking the company to show its returns for financial year 2010-11. The move comes at a time when the government has been proactive in establishing whether multinational companies generate profits from India but escape paying taxes.

However, the notice was sent to Adidas before the company revealed that irregularities at its Reebok India business had shaved off Rs 870 crore of its global profits, said the ET report.

Adidas filed a criminal complaint on 21 May after saying last month it had found flaws at the Indian arm of its Reebok unit. Police are investigating two former Reebok India executives after the company alleged fraudulent practices.The duo was accused of financial embezzlement. However, the two officials told the Delhi high Court last month that their refusal to ‘carry out unethical and illegitimate requests’ by Adidas is what led to bitterness between them and the management. They further alleged that the German sports goods maker asked them to manipulate company accountsas Adidas wanted make a minimum payout to buy out Focus Energy’s 6.85 percent stake in Reebok India.