Google, Yahoo! under fire; Enforcement Directorate to probe forex law violation

Internet search giants Google and Yahoo! are being investigated for possible violations of the country's foreign exchange law, a government official said, intensifying pressure on them as they wage a legal battle over screening of 'objectionable' content on their websites.

The Enforcement Directorate, which has reviewed data from the RBI, suspects the two companies of having violated provisions of the Foreign Exchange Management Act. It has begun a preliminary probe, an official of the agency said without providing more details. No showcause notice has been issued yet. Google, Yahoo! and nearly two dozen other social networking sites are already under fire in India from the government and courts, which want them to better police their sites for offensive content posted by users.

Google has blocked search results on its India sites for some content that can be deemed offensive, but all companies argue that it is impossible for them to filter what users say before it is published.

Quoting Enforcement Directorate sources, PTI reported that the agency is investigating if Google illegally transferred and received investments from abroad, including Ireland. Google said in a statement that it is yet to receive a notice and therefore unable to comment on the details.

"We have an obligation to our shareholders to set up a tax-efficient structure and our present structure is compliant with the tax rules in all the countries where we operate," it said, drawing attention to the "substantial contribution" it makes by way of taxes and its employment of nearly 2,000 staff in India.

Yahoo! declined comment.