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2021 (3) TMI 326 - AT - Income TaxTDS u/s 194C - disbursements made to Driver-Partners on behalf of Uber B.V - non-deduction of tax at source - default u/s 201(1) / 201(1A) - person responsible for payment - Uber Technologies Inc. is a company incorporated in the United States of America and is the owner of the Uber Application ( Uber App ) which provides lead generation services to independent Driver-Partners who are interested in providing transportation services to Riders ( Users ) - Uber group had set up a subsidiary namely, Uber India Systems Private Limited (UISPL) in India ( i.e. the assessee company) on 16 August 2013 to market and promote the use of the Uber App in India and provide support services in connection with the same - HELD THAT - Uber B.V. (through Uber India Systems Private Limited ( UISPL ), acting as its limited payment and collection service provider), also acts as the Driver-Partners' payment and collection agent, solely for the purpose of collecting the fare paid by the Users through digital modes, for the transportation services provided by the Driver-Partners and disbursing the same toDriver-Partner after deducting its Service Fee, if so required on an each trip basis by the User. This enables Users to electronically effect payment to the Driver-Partner for the transportation services rendered by the latter to the former. It is pertinent to note here that the Users can equally choose to pay by cash, which is paid directly to the Driver-Partners upon completion of the trip. The legislature in its wisdom had duly provided for the relevant provisions in the Act by specifically mentioning mere remitter of money to deduct tax at source as is provided in section 204(iv) of the Act, wherein, Drawing and Disbursing Officer (DDO) i.e. the remitter of money for Government, wherever required, need to deduct tax at source being person responsible for paying. The said provision is restricted to payment made by DDO on behalf of the Government and the same cannot be extended to other payments made by outsiders. Hence UISPL (i.e. the assessee company) being a mere remitter of collections made on behalf of the Driver-Partner at the direction of Uber B.V. cannot be held as the Person responsible for paying within the meaning of section 194C read with section 204 of the Act. Applicability of provisions of section 194C - Uber B.V. is involved in rendering lead generation service to the Driver-Partner and transportation service is not provided by Uber B.V. or UISPL. The transportation service is provided by the Driver- Partner to the User for which the car is arranged by the Driver-Partner, all the expenses are incurred by the Driver-Partner, necessary permits and licenses are obtained by the Driver-Partner and the liability arising out of the transaction of transportation service is assumed by the Driver-Partner.Uber B.V. is neither responsible for providing transportation service nor any liability arising out of the transportation service provided by the Driver-Partners. The transportation service provided by the Driver-Partner to Users is a contract between them to which Uber B.V. is not a party. For providing lead generation service, the Driver-Partner pays a percentage of the ride fare as a service fee to Uber B.V. Therefore, it is clear that UISPL is not a part of the contract and no payment obligation is imposed either under the agreement with the Driver-Partner or under the agreement with the User. Hence it could be safely concluded that the provisions of section 194C of the Act are not applicable in the instant case of the assessee as a) UISPL is not the person responsible for making payment b) UISPL has not entered into any contract with the Driver-Partners c) no work is carried out by the Driver-Partners for UISPL. We find that the ld. AR drew our attention to the fact that Uber B.V. has been recognized as an aggregator under the Service Tax Law. Section 66B of Finance Act, 1994 provides that service tax to be paid at prescribed percentage on the value of services provided in India - 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. And, Uber B.V. and UISPL are not a party to the contract of transportation entered into between a User and a Driver-Partner. Principle of Consistency in the assessment made bv the Department - We find that the ld. AO while passing the assessment order under section 143(3) of the Act for the Asst Year 2016-17 dated 8.12.2018 had duly accepted the fact that UISPL is an entity engaged in the business of providing marketing and support services to Uber B.V. and not in the business of providing transportation service. Accordingly, no disallowance u/s 40(a)(ia) of the Act was made thereon. Even for earlier assessment years, i.e., AY 2014-15 and AY 2015-16, when the payment was collected and disbursed directly by Uber B.V. from an account outside India, Department has not invoked provisions of section 194C of the Act for the payments made to Driver-Partners in those years. Department has been consistently taking a view that the provision of section 194C of the Act are not applicable in the hands of UISPL and has assessed UISPL as a marketing and support service provider to Uber B.V. without making any disallowance under section 40(a)(ia). Hence, in the absence of any change in the facts and circumstances of the case, the department is not permitted to take a different view in the matter for the years under consideration. Conclusion - 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. Hence 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. - Decided in favour of assessee.
Issues Involved:
1. Whether the assessee company (UISPL) can be treated as an 'assessee in default' under section 201(1) of the Income Tax Act, 1961 for non-deduction of tax at source under section 194C. 2. Whether UISPL is the 'person responsible for paying' under section 204 of the Act. 3. Applicability of section 194C to the transactions between Uber B.V., UISPL, Driver-Partners, and Users. 4. Principles of natural justice and enhancement of assessment without proper opportunity. 5. Levy of interest under section 201(1A) and initiation of penalty proceedings under section 271C. Detailed Analysis: 1. Assessee in Default under Section 201(1): The primary issue is whether UISPL can be considered an 'assessee in default' for non-deduction of tax at source under section 194C. The Tribunal concluded that UISPL cannot be treated as an 'assessee in default' because it does not satisfy the conditions required under section 194C. UISPL is not the person responsible for paying, there is no contract between UISPL and Driver-Partners, and the payments made by UISPL are not for carrying out any work for UISPL. The Tribunal emphasized that UISPL is merely a remitter of money collected on behalf of Uber B.V. and not liable to deduct tax at source. 2. Person Responsible for Paying under Section 204: The Tribunal analyzed whether UISPL is the 'person responsible for paying' under section 204. It was determined that UISPL does not fall under the definition of 'person responsible for paying' as it is only a remitter of money collected from Users on behalf of Uber B.V. The Tribunal noted that the User is the actual payer for the transportation services provided by the Driver-Partners, and UISPL merely facilitates the payment. Therefore, UISPL cannot be held responsible for deducting tax at source. 3. Applicability of Section 194C: The Tribunal examined the applicability of section 194C to the transactions in question. It was concluded that section 194C does not apply to UISPL because: - UISPL is not the person responsible for making payments. - There is no contract between UISPL and the Driver-Partners. - The payments are not for carrying out any work for UISPL. The Tribunal also highlighted that Uber B.V. is recognized as an aggregator under the Service Tax law, which further supports the conclusion that UISPL is not liable under section 194C. 4. Principles of Natural Justice and Enhancement of Assessment: The Tribunal addressed the assessee's contention that the assessment was enhanced without providing a reasonable opportunity to be heard, which violates the principles of natural justice. The Tribunal found merit in this argument, noting that the enhancement was made without proper consideration of the assessee's submissions and explanations. 5. Levy of Interest under Section 201(1A) and Penalty Proceedings under Section 271C: The Tribunal held that the levy of interest under section 201(1A) is consequential and does not require specific adjudication. Regarding the initiation of penalty proceedings under section 271C, the Tribunal deemed it premature for adjudication at this stage. Conclusion: The Tribunal allowed the appeals of the assessee, concluding that UISPL cannot be treated as an 'assessee in default' under section 201(1) for non-deduction of tax at source under section 194C. The Tribunal emphasized that UISPL is not the person responsible for paying under section 204 and that the provisions of section 194C do not apply to the transactions in question. The Tribunal also noted that the enhancement of assessment without proper opportunity violated the principles of natural justice. The levy of interest and initiation of penalty proceedings were deemed consequential and premature, respectively.
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