Uber India not liable to deduct TDS on Drivers pay

IN THE INCOME TAX APPELLATE TRIBUNAL

The Text of the Order as follows :

1. By way of this stay application, the assessee applicant seeks a stay on collection/recovery of the outstanding amount of tax and interest etc, aggregating to Rs 77,84,56,072, in respect of tax withholding demands under section 201 r.w.s. 194C of the Income Tax Act, 1961, for the assessment year 2018-19.

2. To adjudicate on this stay petition, only a few material facts need to be taken note of. The assessee before us is a company incorporated in India and is engaged in the business of providing marketing and support services to Uber BV, a company incorporated and fiscally domiciled in the Netherlands. Uber BV is a technology company that has licence to Uber App that provides lead generation services to independent transport services providers, i.e. drivers partners. Uber BV has engaged the assessee for certain support services and for payment collection and remittances services. A survey under section 133A(2A) on the office of the assessee, and based on the findings in these survey proceedings, the Assessing Officer was of the view that the assessee has failed in his obligations under section 194 C inasmuch what, according to the Assessing Officer, the assessee does is to provide transportation services to the app users and these services are provided through the drivers who work for the assessee under a contract. It was also noted that the assessee has submitted PAN numbers of only 3,70,477 drivers out of 4,22,315 drivers working with the assessee. The Assessing Officer was of the view that for these 12% odd cases, under section 206AA, the tax deduction liability to be computed @ 20% whereas in the balance cases, the applicable tax deduction rate was 1%. It was in this backdrop that the Assessing Officer computed tax withholding liability under section 201(1) at Rs 102,01,00,959 and interest liability under section 201(1A) at Rs 11,83,55,112. Aggrieved, assessee carried the matter in appeal before the CIT(A) but without any success. The assessee is not satisfied and is in further appeal before us. Out of the total demands raised on the assessee, aggregating to Rs 113,84,56,072, the assessee has so far paid only Rs 36,00,00,000. The assessee has also filed this petition seeking a stay on collection/ recovery of the outstanding demands for tax and interest, aggregating to 77,84,56,072.

3. We have heard the rival contentions, perused the material on record and duly considered facts of the case in the light of the applicable legal position.

4. While we refrain from making any observations on merits of the case, having heard the rival contentions even on merits at considerable length, we may record our satisfaction that prima facie the assessee has an arguable case in appeal and that, given the peculiar facts of this case, the balance of convenience is in favour of the collection or recovery of the impugned demands, through coercive measures, being stayed the disposal of this appeal, till the end of 180 days from the date of this order or till further orders- whichever is earlier, subject to the condition that the assessee will fully cooperate in expeditious disposal of the appeal, and that the assessee will not seek any unnecessary adjournment. As a corollary to this stay being granted, we also direct the Registry to schedule this appeal, for an out of turn hearing, on 27th January 2021. Ordered, accordingly We may also add that we have noted that the assessee has admittedly paid more than 20% of the original demands raised on the assessee, and, therefore, it is not even necessary to deal with implications of first proviso to Section 254(2A). Learned Departmental Representative, however, has filed a written wherein it is stated that “at the time of filing of stay of demand petition by the assessee, demand/ sum payable denotes total demand (including interest) as reduced by the amount already paid by the assessee before filing of the stay petitions”, but then this plea is only to be noted and rejected. On the fact of it, beyond any dispute or controversy, he reference to the said requirements of pre-payment of at least 20% of the amount of tax, interest, fees or any other sum “payable under the provisions of this Act” apparently refers to the statutory liability and not the outstanding amount. By no stretch of logic, therefore, these requirements of first proviso to Section 254 (2A) come into play in the present case. We need not, therefore, deal with that aspect of the matter at this stage.

5. In the result, the stay petition is allowed in the terms indicated above. Pronounced in the open court today on the 12th day of January, 2021.