The Income Tax Appellate Tribunal (ITAT) has delivered a mixed verdict in the case concerning BBC Global News Limited, following income tax raids that took place in February 2023. The tribunal, in a decision that partially favors the BBC, has reduced the profit attributed to the company’s Indian operations from 15 percent to 12 percent of its advertising revenue. The case, titled BBC Global News Limited Vs DCIT, was presided over by a bench consisting of Judicial Member Vikas Awasthy and Accountant Member Renu Jauhri.
The tribunal rejected the BBC’s request to retain the previously established profit attribution rate of 8.75 percent, which was agreed upon for earlier assessment years. This rate had been set after negotiations between Indian and UK tax authorities under the Mutual Agreement Procedure (MAP) for the assessment years 2004-05 to 2014-15. However, the ITAT found the 15 percent rate set by the Assessing Officer (AO) to be excessive and based merely on estimates.
The central issue in the dispute was the extent of the BBC’s advertising revenue that could be classified as profit earned through its Indian operations and, consequently, taxed in India. The BBC proposed maintaining the earlier rate of 8.75 percent, while the Income Tax Department revised it to 15 percent, claiming the Indian entity performed more functions than disclosed. The ITAT determined that while an increase was justified, the 15 percent rate was excessive, and thus set it at 12 percent.
BBC Global News is a tax resident of the United Kingdom, operating the BBC World News television channel and the BBC website. Its Indian entity, BBC Global News India Private Limited (BGNIPL), acts as its dependent agency permanent establishment (DAPE) in India. Notably, the Income Tax Department conducted raids at BBC’s offices in Delhi and Mumbai from February 14 to 16, 2023, under Section 133A of the Income Tax Act. This resulted in reassessments for the financial years 2017-18 to 2021-22, during which the attribution rate was increased to 15 percent.
The Department justified the rate increase based on testimony from key BBC officials, including Vishal Bhatnagar, South Asia’s sales director for advertising. It argued that BGNIPL engaged in activities not disclosed in the BBC’s transfer-pricing study report, such as promoting advertising airtime, securing orders, collecting payments, and undertaking business development and marketing research.
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The ITAT concluded that the BBC did not adequately refute the Department’s findings regarding these additional activities. It emphasized the need to enhance the profit attribution to reflect these activities: “The rate of attribution of profit to the assessee’s PE in India needs to be enhanced to compensate for the additional activities carried out by the PE in India,” the tribunal stated.
Although the tribunal acknowledged that the previous MAP resolution was not binding for assessment years not explicitly covered, it found the 15 percent attribution excessive. “It is equally true that the AO, on mere estimation, has enhanced the attribution of profit from 8.75% to 15%. In our considered view, the rate of attribution as determined by the AO is very much on the higher side,” the tribunal observed.
Consequently, the tribunal limited the attribution rate to 12 percent. Additionally, it remanded the BBC’s claim for tax credits paid by BGNIPL back to the AO for verification and quantification.
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The BBC was represented by Senior Advocate Sachit Jolly, advocates Abhudaya Shankar Bajpai and Sohum Dua, and chartered accountant Anurag Singhal. The Income Tax Department’s legal team included Senior Advocate Indruj Singh Rai and advocate Gourav Kumar.
