Honda`s Mugen Corp has been busted for severe tax evasion.

SAITAMA -- The eldest son of the late Soichiro Honda, the founder of Honda Motor Co. Ltd., was arrested Tuesday over massive tax evasion of an engine manufacturer he runs, officials said.

Hirotoshi Honda's company, Mugen Co., in Asaka, Saitama Prefecture, is suspected of evading the payment of about 1 billion yen in corporate tax by failing to properly declare more than 3 billion yen income for a three-year period until October 2000.

Honda, 61, and Norio Hirokawa, a former auditor to Mugen, played a leading role in the company's tax evasions, said crime busters of the Saitama District Public Prosecutors Office when they arrested the two.

Honda and Hirokawa cooked the company's ledgers with the fictitious cost of materials bought in dealings with a leasing company also run by the Mugen president.

Investigators suspect that Honda and his firm spent the funds on land in Tokyo's Minato-ku.

Mugen technology is known worldwide through the development of engines that won several Formula-1 events.

Honda Motor Co. formerly owned a 40 percent interest in Mugen, but currently no formal relationship exists between the two companies. (Mainichi Shimbun, Japan, July 1, 2003)