The income tax department on Friday said that a survey operation conducted at the business premises of group entities of a “prominent international media company” at Delhi and Mumbai revealed irregularities in various tax payments. While the department did not name the firm, the statement came a day after it completed a three-day “survey” of the India operations of the British Broadcasting Corporation (BBC).
The tax survey has ignited a political row in India, as it followed the release of the documentary ‘India: The Modi Question’ by the BBC last month, on the 2002 Gujarat riots. The documentary was banned in India shortly after its release. Prime Minister Narendra Modi was the state’s chief minister during the riots.
“The survey revealed that despite substantial consumption of content in various Indian languages (apart from English), that the income and profits shown by various group entities is not commensurate with the scale of operations in India,” the tax department said.
“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,” it further said.
The survey operations carried out under Section 133-A of the Income Tax Act also revealed that services of seconded employees had been used, for which reimbursement was made by the Indian entity to the foreign entity. The department said such remittance is liable to be subject to withholding tax, which was not done.
Further, the survey also threw up several discrepancies and inconsistencies with regard to transfer pricing documentation, it added. “Such discrepancies relate to level of relevant function, asset and risk analysis, incorrect use of comparables which are applicable to determine the correct arm’s length price and inadequate revenue apportionment, among others,” it further said.
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 department said.
It also stressed 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 and agreements sought,” it said, adding that despite such stance of the group, the survey operation was conducted in a manner so as to facilitate continued regular media and channel activity.
The I-T department had initiated the survey of BBC offices in Delhi and Mumbai from about the mid-morning of February 14, which continued for close to 60 hours till February 16.
The BBC on Thursday had said it stood beside its journalists “who will continue to report without fear or favour”, as the I-T department ended its three-day survey at its offices. The media firm also said its priority was the welfare of its staff who, it said, faced “lengthy questioning” and were “asked to stay overnight”. It, however, said its output was “back to normal”, and that it remained “committed to serving” its India audiences.