Uber India B.V. is interested in providing lead generation services to the Driver-Partner, but Uber B.V. and UISPL do not offer transportation services. The Driver-Partner provides the User with transportation service, for which the Driver-Partner arranges the vehicle, incurs all costs, obtains all requisite permits and licenses, and assumes all liability resulting from the transportation service transaction.
Uber B.V. is not responsible for the transportation service provided by the Driver-Partners, nor is it liable for any liability resulting from the transportation service provided by the Driver-Partners. The transportation service offered to Users by the Driver-Partner is governed by a contract between the two parties to which Uber B.V. is not a party. The Driver-Partner pays Uber B.V. a portion of the ride fare as a service charge for offering lead generation services. As a result, it is clear that UISPL is not a party to the arrangement, and no payment obligations are levied by either the Driver-Partner or the User agreements.
As a result, it is fair to infer that the provisions of section 194C of the Act are not applicable in the instant case of the assessee because:
- UISPL is not the person responsible for payment; and
- UISPL is not the person responsible for payment.
- No contract has been signed between UISPL and the Driver-Partners.
- The Driver-Partners do not perform any “job” for UISPL.
We find that the ld. AO had properly recognised the fact that UISPL is an agency engaged in the business of providing marketing and support services to Uber B.V. and not in the business of providing transportation service when passing the assessment order under section 143(3) of the Act for the Asst Year 2016-17 dated 8.12.2018. As a result, no disallowance was rendered under section 40(a)(ia) of the Act.
Furthermore, the Department has not invoked the provisions of section 194C of the Act for payments rendered to Driver-Partners in earlier assessment years, namely AY 2014-15 and AY 2015-16, when the payment was received and disbursed directly by Uber B.V. from an account outside India.
As a result, the Department has consistently held the position that section 194C of the Act does not apply to UISPL, and has evaluated UISPL as a marketing and support service provider to Uber B.V. without rendering any disallowance under section 40(a) (ia). As a result, unless the facts and circumstances of the case change, the agency is not allowed to take a different position in the matter for the years in question.
We discovered that the addition of clause (v) to section 204 of the Act is only valid as of 1.4.2020, i.e., from the first fiscal year 2020-21 onwards. We believe that this amendment clarifies that someone who is allowed to make a payment on behalf of a non-resident will be subject to section 204 of the Act and will be required to deduct tax at the source. The revenue does not believe that the assessee business should be charged as a non-resident agent under section 163 of the Act. It is in the case of sales, which UISPL pays to Driver-Partners on behalf of Uber B.V. ( non-resident entity).
The Finance Act 2020 expressly inserted this provision into the legislation with effect from 1.4.2020, and it cannot be applied to previous years. This amendment cannot be considered clarifying in nature, thus making it retroactive in effect, since it was not introduced with the phrase “for the elimination of doubts.”. If the revenue version is accepted, then there would be no need for the parliament to introduce this amendment by way of insertion of clause (v) in section 204 o because UISPL was making payment to Driver-Partners on behalf of Uber B.V. (Non-resident) and the said provision was already there in the statute.
To put it another way, if the revenue’s claim is approved for the years under consideration, the entire amendment inserted by Finance Act 2020 in section 204 of the Act becomes redundant and otiose. As a result, the subsequent amendment to section 204 of the Act, which took effect on 1.4.2020 and added clause (v) thereto, will improve the assesses position and various contentions for the years in question.
From the aforesaid elaborate observations in the facts and circumstances of the instant case, it could be safely concluded that UISPL cannot be treated as a ‘person responsible for paying‟ for the purpose of section 194C read with section 204 of the Act, for more than one reason and also the provisions of section 194C of the Act cannot be made applicable thereon. Hence the assessee company i.e. UISPL cannot be treated as an ‘assessee in default‟ and no order could be passed u/s 201 / 201(1A) of the Act in its hands for the years under consideration.
Though the case before the ITAT covers two years, the tribunal states that a tax demand of Rs 24.9 crore (including penal interest) was issued to the Indian company for failure to deduct tax at source under section 194-C of the Income Tax (I-T) Act for the financial year 2015-16. This section outlines the requirements for deducting TDS from payments made to contractors and subcontractors. Although the case heard by the ITAT spans two years, the tribunal states that for the financial year 2015-16, the Indian company was issued a tax claim of Rs 24.9 crore (including penal interest) for failure to deduct tax at source under section 194-C of the Income Tax (I-T) Act. This section outlines the requirements for deducting TDS from payments made to contractors and subcontractors.
The ITAT pointed out that the transportation service is offered directly to users (passengers) by the driver-partners. It is the passengers’ responsibility to make the charge. Uber India and Uber Netherlands are not parties to the ‘contract of transportation’ that a commuter and an Uber driver enter into. The driver-partners are not employed by Uber BV, and the vehicles are not owned by Uber BV. It merely provides lead-generation services on a principal-to-principal basis through an app in exchange for a service fee (roughly 20% of the fare).
The ITAT concluded in an order dated March 4 that the provisions of section 194-C do not apply because Uber India is not the individual responsible for making the payments, it has not entered into any contract with the driver partners, and the driver-partners do not perform any work for Uber India.
However, the situation could change if the Internal Revenue Code is amended. From the financial year 2019-20 onwards, clause (v) was added in section 204 of the I-T Act, according to the ITAT. It mandates that any person authorized to make a payment on behalf of a non-resident deduct tax at the point of sale. This, however, does not extend to previous years.
For more than one reason, UISPL cannot be considered as a “individual responsible for paying” for the purposes of section 194C read with section 204 of the Act, and the provisions of section 194C of the Act cannot be made applicable thereon.
As a result, the assessee firm, UISPL, cannot be considered as a “assessee in default,” and no order u/s 201 or 201(1A) of the Act may be issued in its favour for the years in question.