As reported earlier, routine TDS surveys have been carried in the office of Uber India in Mumbai. Uber India was regarded by tax authorities as the front face for Uber BV — the Netherlands company — and was treated as an ‘assessee-in-default’ for non-compliance with TDS obligations.
While the case heard by the ITAT covers two consecutive years, the tribunal illustrates that for the financial year 2015-16, a tax demand of Rs 24.9 crore (including penal interest) had been raised on the Indian company for failure to deduct tax at source under section 194-C of the Income Tax (I-T) Act. This section casts obligations to deduct TDS on payments to contractors and sub-contractors.
The ITAT pointed out that the transportation service is provided by the driver-partners to users (passengers) directly. It is the passengers who are responsible for making the payment. Neither Uber India nor Uber Netherlands are party to the ‘contract of transportation’ entered into between a user and the Uber driver.
Uber BV is not the employer of the driver-partners, not the owner of the vehicles. It merely provides lead-generation services on a principal-to principal basis via an app, for which a service fee (around 20% of the fare) is charged.
In its order dated March 4, the ITAT held that it can be safely concluded that the provisions of section 194-C do not apply as Uber India is not the person responsible for making the payments, it has not entered into any contract with the driver partners and no work is carried out by the driver-partners for Uber India.
However, after an amendment in the I-T Act, the scenario could be different. The ITAT also pointed out that clause (v) was inserted in section 204 of the I-T Act from the financial year 2019-20 onwards. It requires that any entity which is authorised to make payment on behalf of a non-resident will be required to deduct tax at source. However, this cannot apply to prior years, it noted.