Survey operations in Delhi & Mumbai by Income Tax Department

In accordance with section 133A of the Income-tax Act of 1961 (the Act), a survey was conducted at the Delhi and Mumbai offices of group companies of a well-known worldwide media company. The company develops material in several Indian languages, including English, Hindi, and others. It also sells advertisements and other market support services.

Despite significant usage of content in Indian languages other than English, the survey found that group entities’ income and earnings did not correspond to the scope of their operations in India. The Department obtained numerous pieces of information about the organization’s operations during the survey that show tax has not been paid on a number of remittances that the group’s foreign firms have not declared as revenue in India.

The survey activities also showed that seconded employees’ services had been used, for which the Indian company had reimbursed the relevant foreign business. Withholding tax was also supposed to be applied to this transfer, but it wasn’t. A number of anomalies and inconsistencies with relation to Transfer Pricing documents have also been revealed by the survey. Such differences are related to, among other things, a lack of effective revenue apportionment, insufficient Function, Asset and Risk (FAR) analysis, and incorrect usage of comparables that are crucial to determining the correct Arms Length Pricing (ALP).

Via employee statements, digital data, and papers, the survey operation has uncovered important material that will be further explored when the time is right. It is important to note that only employee statements whose roles were vital were recorded, including those principally associated with finance, content development, and other production-related roles. Although though the Department took care to only record statements from key people, it was found that dilatory methods were used, notably when it came to supplying the papers and agreements that were requested. Despite the group’s attitude, the survey operation was carried out in a way that would support ongoing regular media/channel participation.