The Ministry of Finance has issued a statement detailing the survey done by the Income Tax department at the Delhi and Mumbai offices of the BBC. The survey, which started on 14th February, Tuesday, continued for 3 days and ended on Thursday evening. The survey went on for almost 60 hours.
Without naming BBC, the statement said that 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 statement noted that BBC is engaged in the business of development of content in English, Hindi and various other Indian languages; advertisement sales and market support services, etc in India.
The statement said that the income/profits shown by various group entities under BBC India do not match their scale of operations in India, as the quantity of content in India is substantial. In the raid by the Income tax department, which has been described as a survey, several evidences were found that shows 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 ministry further informed that the survey revealed that BBC India had made remittances to its foreign offices for utilising the services of seconded employees, or temporary employees sent from overseas. While such remittances are subjected to withholding tax, BBC avoided it.
Further, the I-T department also found discrepancies and inconsistencies with regard to Transfer Pricing documentation. Such discrepancies relate to the 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, the statement said.
The ministry has said that the survey operation has resulted in the unearthing of crucial evidences by way of statements of employees, digital evidences and documents which will be further examined in due course. “It is pertinent to state 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,” the ministry said.
The finance ministry also said that BBC used dilatory tactics in providing documents sought during the survey. “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,” the statement added. The finance ministry added that despite the lack of adequate cooperation from the group, the survey was done in such a way that it does not interfere with regular operations of the media group. “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 in the statement.