ITAT: Uber India Has No Liability to Pay TDS for Payment To Driver Partners

ITAT: Uber India Has No Liability to Pay TDS for Payment To Driver Partners

The Income Tax Appellate Tribunal (ITAT), Mumbai Bench, on 4 March 2021, in the case titled M/s. Uber India Systems Private Limited (Appellant) v. CIT (Respondent) held that Uber India is not liable to pay tax at deducted source (TDS) for Payments to Driver Partners.

The ITAT coram headed by Vice President Mahavir Singh clarified that three conditions are required to be fulfilled in entirety for the department to conclude that the Uber India Systems Private Limited (UISPL) is required to withhold taxes under Section 194C of the Income Tax Act (IT Act) on disbursements to Driver-Partners.

The three conditions are as under-

- UISPL should be the 'person responsible for paying' as per provisions of Section 204 of the Act.

- The disbursements to be made to the Driver-Partners should be in pursuance for carrying out any work by the Driver-Partners for UISPL.

- There is a contract entered into between the Driver-Partners and UISPL for the said work.

The appellant is a company incorporated in the United States of America (US) and is the owner of the Uber Application which provides lead generation services to independent Driver-Partners who are interested in providing transportation services to Riders.

On 16 August 2013, the Uber group had set up a subsidiary UISPL in India for marketing and promoting the use of the Uber App in India and provides support services in connection with the same.

Uber B.V. has engaged the appellant to provide support services under an Intercompany Service Agreement and Payment Collection and Remittance Services Agreement, for an arm's length consideration, i.e. cost plus 8.5%. This fee has been the subject matter of scrutiny and the assessing officer (AO) has not questioned the arm's length basis of the said services provided by UISPL.

The AO has held that Uber B.V. is in the business of providing transportation services; Section 194C of the IT Act would be applicable when the payments are made to Driver-Partners.

The AO further opined that since the assessee company is the face of Uber B.V. in India, it is the person responsible for making payment and consequently liable to deduct tax at source under Section 194C.

The said order of the AO was affirmed by the Commissioner of Income Tax Appeals [CIT(A)].

An appeal was filed before the ITAT against the order of the CIT(A). The ITAT noted that any of the three conditions (mentioned above) are not satisfied-

- UISPL is not the person responsible for making payment

- UISPL has not entered into any contract with the Driver-Partners

- No work is carried out by the Driver-Partners for UISPL.

The ITAT stated in its order that "It becomes very clear that one wing of the legislature has recognized Uber B.V. as an aggregator and not a service provider which again brings us to the same point that the transportation service is provided by Driver-Partner to Users directly for which User is making the payment and it is the User who is the person responsible for making payment. Uber B.V. and UISPL are not a party to the contract of transportation entered into between a User and a Driver-Partner."

While allowing the appeal the ITAT held, "UISPL cannot be treated as a person responsible for paying for the purpose of Section 194C read with Section 204 of the Act, for more than one reason and also the provisions of section 194C of the Act cannot be made applicable thereon."

It added, "The assessee company i.e. UISPL cannot be treated as an assessee in default and no order could be passed u/s 201 / 201(1A) of the Act in its hands for the years under consideration."