BBC India profits not commensurate with scale of operations: CBDT

The Central Board of Direct Taxes (CBDT) on Friday said that profits of various BBC entities are not in line with the scale of its business in India.

"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," Surabhi Ahluwalia, official spokesperson of CBDT, said in a statement.

The BBC produces content in English, Hindi and various other Indian languages.

The tax department gathered evidence pertaining to the operation of the organisation which indicates 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, according to the finance ministry.

This comes three days after the income tax department carried out a "survey" at the Delhi and Mumbai offices of the BBC, the United Kingdom's national broadcaster. Unlike raids, surveys are generally carried out in the business premises, that too during working hours. Documents that are taken away during a survey can be retained by the authorities only for a limited period.

"The survey operations also revealed that services of seconded employees have been utilised for which reimbursement has been made by the Indian entity to the foreign entity concerned," the income tax official said, adding that such remittance was also liable to be subject to withholding tax which has not been done.

The key focus of the survey was to look into manipulation of prices for unauthorised benefits, including non-compliance under transfer pricing rules. "The survey has also thrown up 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," the statement said.

The tax survey has resulted in unearthing of crucial evidence by way of statement of employees, digital evidence and documents which will be further examined in due course, the CBDT said.

"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," it added.

Even though the tax 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 sought, the ministry said.

On Tuesday, Fortune India reported that BBC had to write-off ₹7.2 crore from its pension fund following its exposure to the two tainted non-banking companies, IL&FS and DHFL. The New Delhi-based subsidiary of the UK's national broadcaster along with other group entities, BBC Studios India Pvt Ltd and BBC Global News India Pvt Ltd, has a provident fund scheme under a trust called as the BBC Worldwide India Employees Provident Fund. The trust had an exposure of ₹2.85 crore and ₹4.35 crore in the securities of IL&FS and DHFL, respectively.