In ITA no.126/Mum./2023- ITAT- Mumbai ITAT rules Uber India not liable for driver partner payments under Section 194C of the Income Tax Act
Members Prashant Maharishi (Accountant) & Sandeep Singh Karhail (Judicial) [26-04-2023]

Read Order: Commissioner of Income Tax (OSD) v. Uber India Systems Pvt. Ltd

Chahat Varma

New Delhi, May 16, 2023: The Mumbai bench of the Income Tax Appellate Tribunal has ruled that Uber India Systems Pvt. Ltd. (UISPL) cannot be considered a ‘person responsible for paying’ under section 194C read with section 204 of the Income Tax Act in respect of payment made to driver partners on behalf of Uber BV for the transportation services.

Brief facts of the case are that the assesee, is an Indian company that operates the Uber BV business in India. Uber BV, incorporated in the Netherlands, is the legal owner of the Uber App software application. The primary services offered through the Uber App are transportation services, where passengers request rides and drivers/vehicle owners accept the requests. Additionally, the assessee also provides food delivery services. The sole issue raised by the Revenue related to the applicability of section 194C of the Income Tax Act on payments made to driver-partners through the Uber App and payments made to restaurant and courier partners through the Uber EATS App.

The Assessing Officer-TDS (AO-TDS) observed that in the instant case, the agreement may have been signed between the driver, who is a contractor, and the specified person, which is a foreign enterprise Uber BV, but as far as the liability to deduct TDS, the same would lie on the person, i.e., the assessee, who is making the payment. Accordingly, the AO-TDS held that the assessee is making substantial payments to driver partners, the restaurant partners, and the courier partners without deducting tax at source, thereby violating the provisions of Chapter XVIIB of the Act and more specifically section 194C read with section 204 of the Act.

The Tribunal remarked that the issue arising in the present appeal was recurring in nature and has been decided by the Co-ordinate bench of the Tribunal in the preceding assessment years.

The Tribunal examined the previous case of M/s Uber India Systems Private Ltd vs JCIT-TDS [LQ/ITAT/2021/2912], wherein it has been ruled that UISPL cannot be considered a ‘person responsible for paying’ under section 194C read with section 204 of the Income Tax Act in respect of payment made to driver partners on behalf of the Uber BV for the transportation services and the assessee cannot be treated as an ‘assessee in default’ under section 201(1)/201 (1A) of the Act.

The Tribunal observed that UISPL makes payments on behalf of Uber B.V., and therefore, UISPL cannot be considered a ‘person responsible for paying’. It was further observed that the payments made by UISPL to driver-partners were not for the purpose of carrying out any work for UISPL, and there was no contractual relationship between UISPL and the driver-partners.

In respect of digital payments made by the User, it was observed that UISPL was only a payment and collection service provider which collected the money and made the payment on behalf of Uber B.V. Moreover, when users made cash payments directly to driver-partners, UISPL was not even aware of those transactions. In such circumstances, expecting UISPL to be responsible for deducting tax at source would result in impossibility of performance for the company.

It was concluded that the person responsible for paying in relation to the transactions facilitated through the Uber App is the user of the app. The user enters into a contract with the driver-partner for the transportation services, and therefore, they hold the responsibility for payment.

With the above observations, the appeal filed by the Revenue was dismissed.