The assessee “UBER India” is a domestic company, engaged in the services of marketing and support services to UBER B.V., a non-resident company which is engaged in providing digital platform services to drivers in India.
The assessee was specifically introduced in the system to meet the RBI norms and its role was limited to the collection and payment of sums of money on the behalf of UBER B.V and thereby making payment to the drivers along with remitting the money to UBER B.V after deducting certain commission.
There was no privity of contract between the Assessee and the Driver partners nor there was any contract with UBER B.V.
The only contract that existed was between the Driver partners and the user of service.
The department contended that the assessee is the face of UBER B.V. in India and the person responsible for making payment to the Driver partners, thus the assessee should deduct TDS on payments made to Driver partner.
The service is in the nature of transportation services, and not in the nature of service of digital platform.
It is the assessee that selects the Driver partner, vehicle and sets a fare for the user and the user has no control over it, which is explicitly a transportation service.
The assessee is neither the person responsible for making the payment to the Driver partner nor the assessee is paying for any work carried out for it. Most importantly, there was no contract between the assessee and Driver partner.
The Driver partner are neither providing any transportation services to the assessee nor are they the contractor or agent of the assessee or UBER B.V. and thus out of the ambit of Section 194C of the Income Tax Act,1961(Act).
UBER B.V. acts in the limited capacity as an intermediary between the Driver partner and user.
The assessee contended that the connection between the user and Driver partner is done through the algorithms coded into the application and thereby the user reserves its right to change the vehicle /cancel the ride as per their requirements.
The question before the Tribunal was on the issue whether assessee i.e. Uber India is the person responsible for payment to Driver partner.
The Tribunal held that neither the assessee nor Uber B.V is the engaged in transportation service to the users through Driver partner.
Also, the Tribunal noted that Uber B.V is engaged in the limited role of lead generation services to the Driver partner.
Further, in order to fall within the ambit of withholding tax provisions, the assessee should be the person responsible for payment of such sums of money and such sums of money should have been paid in lieu of contract for service and the Driver partner should have provided services to the assessee.
In the absence of fulfilment of all such conditions, the sum of money paid to Driver partner by the assessee was not subject to withholding tax.
With the amendment in the definition of “person responsible for making payment” in Section 204 of the Act through Finance Act, 2020, the scope of the section stands expanded to cover payments made by a resident on behalf of a non-resident.
Source: Uber India Systems (P.) Ltd v. Joint Commissioner of Income Tax (TDS)(OSD)-2(3), Mumbai, IT APPEAL NOS. 5862 AND 5863(MU
