The Enforcement Directorate has registered a FEMA case against news broadcaster BBC India for foreign exchange violations, official sources said Thursday.
The federal probe agency has also called for documents and the recording of statements of some company executives under provisions of the Foreign Exchange Management Act (FEMA), they said according to PTI.
The probe is essentially looking at purported foreign direct investment (FDI) violations by the company, they said.
According to media reports, six employees of BBC India, including one director were questioned by ED officials regarding the alleged foreign exchange violation. The move comes in the backdrop of the Income-Tax department surveying BBC office premises in Delhi in February.
The Central Board of Direct Taxes (CBDT), the administrative body for the I-T department, had then said the income and profits shown by various BBC group entities were "not commensurate" with the scale of their operations in India and tax has not been paid on certain remittances by its foreign entities.
ED action comes on the back of Income Tax survey
The Income Tax department had carried out surveys at the BBC offices in Delhi and Mumbai in February. Officials claimed to have unearthed “several discrepancies” in the way in which global broadcaster BBC calculated its tax liability in India under transfer pricing regulations.
After a three-day survey during which tax sleuths stormed into the UK-based broadcaster’s offices in Delhi and Mumbai, the IT authorities put out a statement that was short on specifics and couched in tax jargon that left everyone clueless about the nature and outcome of the entire exercise.
“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 said.
“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. Such remittance was also liable to be subject to withholding tax which has not been done,” the tax department said.
According to I-T rules, transfer pricing "generally refers to prices of transactions between associated enterprises which may take place under conditions differing from those taking place between independent enterprises. It refers to the value attached to transfers of goods, services and technology between related entities''.
It also refers to the value attached to transfers between un-related parties which are controlled by a common entity.
Earlier in 2022, BBC World Distribution Limited also came under the scanner of the tax department, which had pointed out that the entity’s distribution revenue will be taxed as royalty proceeds and also whether it has a Permanent Establishment (PE) in India.
However, according to a decision made by the Delhi Bench of the Income Tax Appellate Tribunal (ITAT), the distribution revenue obtained by BBC World Distribution Ltd., from the distribution of the BBC World News Channel in India is not in the nature of a royalty and is therefore not taxable in India in the absence of a Permanent Establishment.