Uber India not liable to pay TDS for Payments to Driver Partners, says ITAT [Read Order]

The Income Tax Appellate Tribunal (ITAT), Mumbai Bench held that Uber India is not liable to pay TDS for Payments to Driver Partners.

The Uber Technologies Inc. is a company incorporated in the United States of America 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.

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.

Uber B.V. has engaged UISPL to provide support services under an Intercompany Service Agreement (as amended from time to time), which is enclosed at Page 1 of the Paper book, and Payment Collection and Remittance Services Agreement, enclosed at Page 37 of Paper book, for an arms” length consideration, i.e.. cost plus 8.5%. This fee has been the subject matter of scrutiny and the assessing officer has not questioned the arm’s length basis of the said services provided by UISPL.

AO has held that Uber B.V. is in the business of providing transportation services, therefore provisions of section 194C of the Act are applicable when the payments are made to Driver-Partners. However, according to him, since UISPL i.e. the assessee company is the face of Uber B.V. in India, UISPL is the person responsible for making payment and consequently liable to deduct tax at source under section 194C., which was affirmed by the CIT(A).

The coram headed by Vice President Mahavir Singh clarified that three conditions are required to be fulfilled in entirety for the department to conclude that UISPL is required to withhold taxes under Section 194C of the Act on disbursements to Driver-Partners.

Firstly, UISPL should be the ‘person responsible for paying’ as per provisions of  Section 204 of the Act.

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

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

The ITAT noted that from the primary facts narrated hereinabove that UISPL does not satisfy any of the 3 conditions prescribed under section 194C of the Act as UISPL makes the payment on behalf of Uber B.V. therefore UISPL is not a person responsible for paying. The amount paid by UISPL is not for the purpose of carrying out any work for UISPL.

Therefore, the Tribunal concluded that 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.

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