BBC survey: Tax dept claims ‘irregularities in payments’, points to ‘crucial evidence’

A day after it concluded its three-day survey on the BBC’s premises in Delhi and Mumbai, the income tax department on Friday claimed to have “unearthed crucial evidences” and “irregularities” in “certain tax payments”.

According to a statement released by the Central Board of Direct Taxes, 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 BBC offices were searched over three days with the government suggesting that the move was linked to an alleged violation of transfer pricing rules and diversion of profits. The search came weeks after the government banned a two-part BBC documentary tracing Prime Minister Narendra Modi’s rise following the 2002 Gujarat riots.

"During the course of the survey, the department gathered several evidences pertaining to the operation of the organisation 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," stated the CBDT statement.

The statement also claimed that the survey "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."

The department also pointed to "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 also claimed that the survey 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".

"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."

Many have claimed that the survey is part of a continuing crackdown on freedom of press and dissent in India under the Narendra Modi government.

A large section of the foreign media has pointed to “signs” of “retaliatory action” and “baseless” claims by pro-government media ahead of the search. Several reports mentioned eroding press freedoms, crackdown on dissent and the new “evidence” in the controversial BBC documentary.

Update at 6.46 pm, Feb 17: This report has been updated with more details on the CBDT statement.