2021 (3) TMI 326 - AT - Income Tax

Tax Tribunal Finds UISPL Not Liable for Default

M/s. Uber India Systems Private Limited Versus Jt. CIT (TDS) (OSD) -2 (3), Mumbai

M/s. Uber India Systems Private Limited Versus Jt. CIT (TDS) (OSD) -2 (3), Mumbai - TMI Issues Involved:1. Whether the assessee company (UISPL) can be treated as an 'assessee in default' under section 201(1) of the Income Tax Act, 1961 for non-deduction of tax at source under section 194C.2. Whether UISPL is the 'person responsible for paying' under section 204 of the Act.3. Applicability of section 194C to the transactions between Uber B.V., UISPL, Driver-Partners, and Users.4. Principles of natural justice and enhancement of assessment without proper opportunity.5. Levy of interest under section 201(1A) and initiation of penalty proceedings under section 271C.Detailed Analysis:1. Assessee in Default under Section 201(1):The primary issue is whether UISPL can be considered an 'assessee in default' for non-deduction of tax at source under section 194C. The Tribunal concluded that UISPL cannot be treated as an 'assessee in default' because it does not satisfy the conditions required under section 194C. UISPL is not the person responsible for paying, there is no contract between UISPL and Driver-Partners, and the payments made by UISPL are not for carrying out any work for UISPL. The Tribunal emphasized that UISPL is merely a remitter of money collected on behalf of Uber B.V. and not liable to deduct tax at source.2. Person Responsible for Paying under Section 204:The Tribunal analyzed whether UISPL is the 'person responsible for paying' under section 204. It was determined that UISPL does not fall under the definition of 'person responsible for paying' as it is only a remitter of money collected from Users on behalf of Uber B.V. The Tribunal noted that the User is the actual payer for the transportation services provided by the Driver-Partners, and UISPL merely facilitates the payment. Therefore, UISPL cannot be held responsible for deducting tax at source.3. Applicability of Section 194C:The Tribunal examined the applicability of section 194C to the transactions in question. It was concluded that section 194C does not apply to UISPL because:- UISPL is not the person responsible for making payments.- There is no contract between UISPL and the Driver-Partners.- The payments are not for carrying out any work for UISPL.The Tribunal also highlighted that Uber B.V. is recognized as an aggregator under the Service Tax law, which further supports the conclusion that UISPL is not liable under section 194C.4. Principles of Natural Justice and Enhancement of Assessment:The Tribunal addressed the assessee's contention that the assessment was enhanced without providing a reasonable opportunity to be heard, which violates the principles of natural justice. The Tribunal found merit in this argument, noting that the enhancement was made without proper consideration of the assessee's submissions and explanations.5. Levy of Interest under Section 201(1A) and Penalty Proceedings under Section 271C:The Tribunal held that the levy of interest under section 201(1A) is consequential and does not require specific adjudication. Regarding the initiation of penalty proceedings under section 271C, the Tribunal deemed it premature for adjudication at this stage.Conclusion:The Tribunal allowed the appeals of the assessee, concluding that UISPL cannot be treated as an 'assessee in default' under section 201(1) for non-deduction of tax at source under section 194C. The Tribunal emphasized that UISPL is not the person responsible for paying under section 204 and that the provisions of section 194C do not apply to the transactions in question. The Tribunal also noted that the enhancement of assessment without proper opportunity violated the principles of natural justice. The levy of interest and initiation of penalty proceedings were deemed consequential and premature, respectively.