BBC IT survey: Govt flags several discrepancies, inconsistencies in transfer pricing documentation

In a statement on Friday, CBDT said that I-T teams unearthed crucial evidence by way of statements of employees, digital proof and documents.

The IT Department launched the survey of BBC offices on February 14, which continued for nearly 60 hours and ended Thursday night.

Without naming the London-headquartered news organization, the Finance Ministry said, “A survey action under section 133A of the Income- tax Act, 1961(the Act) was carried out at the business premises of group entities of a prominent international Media Company at Delhi and Mumbai. The group is engaged in the business of development of content in English, Hindi and various other Indian languages; advertisement sales and market support services, etc.”

The ministry said the survey revealed that despite substantial consumption of content in various Indian languages (apart from English), the income/profits shown by various group entities are not commensurate with the scale of operations in India.

“During the course of the survey, the Department gathered several pieces of evidence pertaining to the operation of the organization which indicates that tax has not been paid on certain remittances which have not been disclosed as income in India by the foreign entities of the group,” the statement read.

The survey operations also revealed that services of seconded employees have been utilised for which reimbursement has been made by the Indian entity to the foreign entity concerned, the statement said, adding that “..such remittance was also liable to be subject to withholding tax which has not been done.”

“Further, the survey has also thrown up several discrepancies and inconsistencies with regard to Transfer Pricing documentation. Such discrepancies relate to level of relevant Function, Asset and Risk (FAR) analysis, incorrect use of comparables which are applicable to determine the correct Arms Length Price (ALP) and inadequate revenue apportionment, among others,” it said.

The ministry said that statements of only those employees were recorded whose role was crucial including those connected to, primarily, finance, content development and other production-related functions.

“Even though the Department exercised due care to record statements of only key personnel, it was observed that dilatory tactics were employed including in the context of producing documents/agreements sought. Despite such stance of the group, the survey operation was conducted in a manner so as to facilitate continued regular media/channel activity,” the ministry said.

Times Now news channel quoted Kanchan Gupta, a senior adviser at the Ministry of Information & Broadcasting, as saying that the BBC was served tax notices in the past but had not provided a "convincing response."

BBC is not the first multinational organization to have under the income tax scanner. In the recent past, several foreign organisations have under the scrutiny of the department over transfer pricing rules.

However, the survey of BBC offices has been criticised by many media organisations and rights group.

The IT survey of BBC offices comes close on the heels of a ban on a BBC documentary on the role of Prime Minister Narendra Modi in the 2002 Gujarat riots.

The links sharing the two-part series, "India: The Modi Question", were taken down from public platforms last month. The Central government used emergency powers under IT Rules to cut off the BBC series link shared by some YouTube and Twitter accounts.

The government slammed the documentary as "hostile propaganda and anti-India garbage".

Meanwhile, the Opposition slammed the BJP-led Centre over the IT survey of the offices of the national broadcaster of the UK, terming it a "political vendetta".

Reacting to I-T officials reaching the BBC offices for a survey, Congress tweeted, "The government is after the BBC while here we demand a JPC (Joint Parliamentary Committee) on the Adani matter."

Rubbishing the criticisms, the BJP reminded Congress that Indira Gandhi had gone a step ahead and banned the BBC in India. "Congress should remember former Prime Minister Indira Gandhi had banned BBC."