Income Tax Department carries out Survey Operations in Delhi and Mumbai

The Income Tax Department conducted a survey at BBC offices in Delhi and Mumbai in connection with an alleged tax evasion.

A survey action under section 133A of the Income- tax Act, 1961(the Act) was carried out at the business premises of group entities of a prominent international Media Company at Delhi and Mumbai. 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. During the course of the survey, the Department 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 survey operations 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. These differences, among others, are related to the level of pertinent Function, Asset and Risk (FAR) analysis, improper use of comparables that are relevant to establish the proper Arms Length Pricing (ALP), and inappropriate revenue apportionment.

The survey operation has uncovered important evidence in the form of employee statements, digital evidence, and papers that will be further reviewed when the time is right. It is important to note that only the statements of workers whose roles were crucial—primarily those related to finance, content development, and other production-related tasks—were recorded. Notwithstanding the Department’s best efforts to record the statements of only key individuals, it was found that dilatory methods were used, notably when it came to supplying the documents/agreements requested. The survey operation was carried out in a way that enabled sustained frequent media/channel activity despite the group’s attitude.