ED registers FEMA Case against BBC for alleged Violation of Foreign Exchange Norms
ED – FEMA Case – BBC – Violation of Foreign Exchange Norms – Foreign Exchange Norms – taxscan
ED – FEMA Case – BBC – Violation of Foreign Exchange Norms – Foreign Exchange Norms – taxscan
The British Broadcasting Corporation (BBC) is under investigation by the Enforcement Directorate (ED) for suspected violations of multiple foreign exchange regulations.
The ED registered the case against the BBC two weeks ago and has already questioned six employees, including a director of BBC India. The investigation is focused on potential foreign direct investment (FDI) breaches committed by the company, and the ED has called for statements and documents from some company executives.
The ED's probe is ongoing, with officials confirming that questioning is still ongoing.
In February, the Income-Tax Department conducted surveys at the BBC's premises in New Delhi and Mumbai, alleging "non-compliance" with transfer pricing rules and the diversion of profits. Income Tax officials looked into the company's books of accounts, bank accounts, cash, stock, and non-valuable documents during the survey.
The Income Tax Department claimed that the surveys aimed to investigate the "manipulation of prices for unauthorized benefits, including tax advantages." The Department also alleged that the BBC had violated transfer pricing rules, diverted profits deliberately, and failed to follow the arm's length arrangement in profit allocation.
The Income Tax Department had earlier flagged the distribution revenue earned by BBC World Distribution Ltd as chargeable to tax as royalty and investigated whether it had a Permanent Establishment in India. However, the Delhi bench of the Income Tax Appellate Tribunal ruled in December 2022 that the distribution revenue received by the company from the distribution of BBC World News Channel in India was "not in the nature of royalty."
The tribunal also stated that such revenue had already been offered to tax by the Indian entity, BBC World India Pvt. Ltd, and "no part of such income can again be attributed to the assessee notionally and taxed in India." Therefore, the tribunal asked for the deletion of such additions by the tax authorities for the 2007-08 and 2008-09 assessment years.
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