BBC Surveys: Govt Claims Exercise Revealed Income Not Commensurate With Scale of Ops in India

Without naming BBC, a statement by the finance ministry said that during the course of the survey, the I-T department allegedly gathered evidence 'pertaining to the operation of the organisation which indicate that tax has not been paid on certain remittances...'

New Delhi: In its first official statement on the Income Tax department ‘surveys’ carried out at the offices of the British Broadcasting Corporation in New Delhi and Mumbai, the Union finance ministry claimed that the exercise had revealed that the “income/profits shown by various group entities is not commensurate with the scale of operations in India”.

The government note, released through the Press Information Bureau, does not name the BBC – but calls it “a prominent international Media Company at Delhi and Mumbai.”

BBC had recently released a documentary on Prime Minister Narendra Modi’s role in the 2002 Gujarat riots. The Union government had blocked the documentary on Twitter and YouTube and said it had “propagandist agenda.” The timing of the raids have thus been criticised as a purported attempt to diminish press freedom.

The Income Tax officials’ survey was done under Section 133A of the Income-Tax Act, 1961, the government said. As Deepak Joshi had written for The Wire while the survey was on, Section 133A controls the remit of the department’s power to conduct a survey. A survey by tax authorities is a comparatively less invasive and intrusive exercise, giving limited jurisdiction and powers to the officers, he wrote.

“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 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 government has said.

It added that during the course of the survey, the I-T department allegedly gathered “several evidences pertaining to the operation of the organization which indicate 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 said:

“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. 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.”

The survey, claimed the government, has unearthed “crucial” evidence in the form of employee statements and digital takeaways.

“The survey operation has resulted in unearthing of crucial evidences by way of statement of employees, digital evidences and documents which will be further examined in due course.”

The government claims BBC employed “dilatory tactics” when asked to produce documents.

“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. 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,” it said.

Reports during the 48-hour survey had said that phones and other devices of many employees had been kept by I-T officials. Employees were also reportedly not allowed to leave the premises initially, something the Section 133A does not permit.

It is important to note that no indiscriminate seizure of mobiles, laptops and digital gadgets can be done at will by the tax officials during a survey, Joshi noted in his analysis. Only books of accounts and documents can be impounded subject to a reasoned order.