New Delhi: The Income Tax department’s survey of the British Broadcasting Corporation or BBC has revealed that income or the profits shown by its various entities “is not commensurate with the scale of operations in India” and evidence has emerged which indicates “the company has not paid taxes on certain remittances”, the Central Board of Direct Taxes (CBDT) said in a statement on Friday.
CBDT added that IT officials have found several discrepancies in the transfer pricing documentation of the BBC.
“The survey revealed that despite substantial consumption of content in various Indian languages (apart from English), the income/profits shown by various group entities is not commensurate with the scale of operations in India,” the statement, issued by Surabhi Ahluwalia, official spokesperson of CBDT, said.
Reacting to CBDT’s claims, a BBC spokesperson said: “The BBC will respond appropriately to any direct formal communication received from the I-T department.”
In the statement, Ahluwalia said that the IT department has gathered evidence pertaining to the operation of the organization during the course of survey, 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 survey operations also revealed that services of seconded employees have been utilized for which reimbursement has been made by the Indian entity to the foreign entity concerned. Such remittance was also liable to be subject to withholding tax which has not been done,”she added.
The statement comes four days after IT officials visited BBC offices in Delhi and Mumbai on Tuesday morning , and carried out a three-day long “survey” operation to ascertain violation of transfer pricing rules and diversion of profits.
It was carried out less than a month after the BBC aired a documentary on the 2002 Gujarat riots, which criticised the role of then chief minister of the state Narendra Modi. The survey was criticised by opposition parties although a BJP spokesperson said the tax department was acting independently. The spokesperson, however, also lashed out at BBC for what he described as its “venomous” coverage of India.
During the operation, around 20-22 IT officers stayed at BBC offices overnight, making copies of documents and questioning employees of BBC.
Specifically on the issue of transfer pricing (a complex area of taxation where one unit of a multinational in one geography is paid for services or products by another unit of the same company in another geography), CBDT claimed the survey has highlighted several discrepancies. “ Such discrepancies relate to level of relevant Function, Asset and Risk (FAR) analysis, incorrect use of comparables, which are applicable to determine the correct Arm’s Length Price (ALP) and inadequate revenue apportionment, among others,” Ahluwalia added.
FAR analysis looks at the functions performed, the assets used for this, and the risks undertaken while doing this by various units of a multinational. This forms the basis of the so-called comparbility study, which assesses the value of the transaction between the units, and which, in turn, leads to the price charged (called arm’s length price)
CBDT clarified on Friday that the survey operation at BBC didn’t hinder broadcaster’s regular media operations and statements of only crucial employees were recorded, while also accusing BBC staff of using dilatory tactics during the three-day long operation.
“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,” CBDT said in its statement.
“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 or agreements sought. Despite such stance of the group, the survey operation was conducted in a manner so as to facilitate continued regular media or channel activity,” it added.