After looking at the BBC’s offices in Delhi and Mumbai for three days, the Income Tax department said on Friday that it had found “several discrepancies and inconsistencies with regard to transfer pricing documentation.” It also said that the income and profits shown by different parts of the BBC group are “not in line with the size of operations” in India.
In a statement, the tax department didn’t mention BBC by name, but said that the surveys had led to the “discovery of crucial evidences through statements of employees, digital evidences, and documents,” which will be looked into more in the future.
Official sources said on Tuesday, the first day of the survey, that there was “persistent non-compliance,” but the statement didn’t say what that meant. It also didn’t say which assessment year the mistakes were made.
“The survey showed that even though content in Indian languages other than English is used a lot, the income/profits shown by different group entities are not in line with the size of operations in India,” it said. “During the survey, the department gathered several pieces of evidence about how the organisation works that show that taxes have not been paid on certain remittances that have not been reported as income in India by the foreign entities of the group,” it said.
“The survey operations also showed that the services of seconded employees had been used, and that the Indian entity had paid back the foreign entity for those services. A tax could have been taken out of this transfer, but that hasn’t happened. Also, the survey has shown that there are a number of differences and problems with the transfer pricing documentation. “These differences have to do with, among other things, the level of relevant Function, Asset, and Risk (FAR) analysis, the wrong use of comparables that can be used to figure out the correct Arm’s Length Price (ALP), and insufficient revenue allocation,” the report said.
The Income Tax department said that it “took care to record only the statements of key personnel, but it was seen that delaying tactics were used, including when documents or agreements were asked for.” “Despite the group’s stance, the survey operation was done in a way that made it easy for regular media and channel activity to continue,” it said.
In response to questions sent by The Indian Express on Friday, BBC said it would respond in the right way if the Income Tax department got in touch with them directly.
In a late-night statement on Thursday, BBC said that the Income Tax officials had left their offices in Delhi and Mumbai. “We will keep working with the authorities, and we hope that the situation will be fixed as soon as possible. We’re helping staff, some of whom have been questioned for a long time or had to stay overnight, and their safety is our top priority. Our output is back to normal, and we’re still committed to serving our audiences in India and elsewhere,” it said.
It said, “The BBC is a trusted, independent news organisation, and we stand by our colleagues and journalists, who will continue to report without fear or favour.”
When the surveys started on Tuesday, the tax department said it was taking action against “non-compliance” with transfer pricing rules and “diversion of profits.” Officials from the government said that the surveys were meant to look into “manipulation of prices for illegal benefits, such as tax advantages.” They had said that BBC didn’t follow the rules for transfer pricing and broke the rules repeatedly and on purpose.
The tax department took action about two weeks after a British TV station showed a documentary about the 2002 Gujarat riots on January 17. On January 20, the central government told YouTube and Twitter to take down links to the documentary. Officials said it “undermined the sovereignty and integrity of India” and had “the potential to harm” the country’s “friendly relations with other states” and “public order within the country.”
While the Opposition called the Income Tax department’s action “intimidation tactics” that showed the Centre’s “undemocratic and dictatorial” attitude, the BJP defended the action and accused the British broadcaster of doing “venomous” reporting on India.