In the order dated March 4, the ITAT held that it can be concluded that the provisions falling under Section 194C of the Income Tax Act will not apply as UISPL is not the person responsible for making the payments and it has not entered into any contract with the driver-partners and no work is carried out by the driver-partners for UISPL.
Facts of the Case
The assesses Company is incorporated in India named M/s United India Systems Private Limited (UISPL) which is involved in the business of providing marketing services to Uber BV, a company which is established in the Netherlands.
Uber BV is a technology company and has a license to operate Uber App that provides lead generation services to independent transport services providers, i.e. to the driver’s partners.
The Assessing Officer was of the view that the contract of transportation exists between the driver-partners and the assessee (UISPL) and therefore the assessee (UISPL) is liable to deduct tax at source while making payment to the drivers under section 194C of the Income Tax Act.
A survey under section 133A(2A) of the Income Tax Act was made on the office of the assessee, and based on the findings in these survey proceedings, the Assessing Officer was of the view that the UISPL has failed in his obligations falling under section 194C of the Income Tax Act.
The assessee (UISPL) provides transportation services to the users of the application and these services are provided through the drivers who work for the assessee under a contract.
So, as per the Assessing Officer, Section 194C would be applicable when the payments are made to the Driver-Partners.
Therefore, the Assessing Officer considered the assessee (UISPL) as assessee in default and calculated tax withholding liability under section 201(1) and interest liability under section 201(1A) of the Income Tax Act.
Analysis of the case
It was analyzed that Uber BV is recognized as an aggregator and not a service provider which brings us to the basic point that the transportation service is provided by the Driver Partners to the Users directly.
The users are making payments to the drivers and they are the ones who are responsible for the same. Uber BV and UISPL are not parties to the contract of transportation entered between a User and Driver Partner.
Therefore, neither UISPL nor Uber BV is a party to the ‘contract of transportation’ entered into between a user and the Uber Driver.
The ITAT allowed the appeal of the assessee and held that UISPL should not be treated as a person responsible for paying for the purpose of Section 194C and therefore the provisions of section 194C cannot be made applicable thereon.
Hence, the assessee company (UISPL) is not treated as Assessee in default and no legal actions can be passed under Section 201 of the Income Tax Act.