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2023 (3) TMI 515 - AT - Income TaxTDS u/s 194C - non-deduction of tax on "Ride Charges" by OLA - payments to the TSPs [Transport Service Providers] for “carrying out work” relating to the carriage of passengers - assessee-in-default under section 201 (1 )/201 (1 A) for non deduction of TDS - assessee is a leading technology service provider in the cab hailing market in India to establish mobility for the Indian masses and it provides internet and mobile technology platform for cab hailing by the passengers [hereinafter referred to as “Rider(s)”] as operates under the brand name “OLA” - As per the assessee, in the capacity of a mere facilitator, the assessee is the operator of the said platform, which essentially serves as a repository of potential users (Riders/ Customers as well as Drivers) and is capacitated, through advanced algorithms, to integrate Rider preference - who is responsible for providing the transportation services to the Rider i.e., the Driver, who has the necessary approvals and the vehicle or the assessee, who owns the app? - HELD THAT:- As held that the assessee merely acts as an intermediary between the Driver and the Rider. Therefore, when the Rider itself is exempt from deducting tax at source for such personal use, we see no reason why an intermediary such as the assessee, be forced to deduct tax at source at the time of disbursement of Fare to the Driver after collecting it in electronic mode from the Rider. We are also unable to reconcile the contradictory legal stands with respect to Fare collected by the Driver from the Rider directly and Fare involving electronic payment that is merely routed through the assessee, when the service is undisputedly the same. Whether recognition as an “aggregator” under Service Tax laws should not absolve the assessee of its liability under Income Tax laws? - This aspect has also been addressed in Uber India (2021 (3) TMI 326 - ITAT MUMBAI] in the favour of the assessee. Further, we find reason in the justification given by the Ld. AR that owing to the distinction carved out by the Legislature between an “aggregator” and “Service Provider”, the assessee revamped its accounting and did not route amounts of Fare to be forwarded by it to the Driver through its profit and loss account. Therefore, from AY 2016-17, the assessee did not deduct tax under section 194C while disbursing Fare to the Driver. There is no estoppel in law and therefore, no obligation can be imposed on the assessee basis a conservative position having been taken by it in the past, when none may have existed. We also agree with the submissions advanced by the Ld. AR that control in the present case is only a measure of compliance by the assessee with the guidelines issued by the Central Government/ State Governments in accordance with the Motor Vehicles Act, 1988 and applicable to an aggregator as defined under section 2(1A) therein, which the assessee before us is. We find that from 01.09.2019, the concept of “aggregator” has been recognised even under the Motor Vehicles Act, 1988. According to section 93(1)(iii) Motor Vehicles Act, 1988, a distinction between license of an aggregator and Transport Service Provider [for “contract carriage” under section 2(7) read with section 66 of the Motor Vehicles Act] like Driver has been carved out. Therefore, since an aggregator, like the assessee, is not entitled to obtain a license in respect of a contract carriage, it cannot be said to have sub-contracted work in respect of such contract carriage to any Driver. Capping of maximum fare by Regional Transport Authorities, puts it beyond all doubts as to who regulates the prices for taxis. Therefore, there is no merit in the argument of the AO/ CIT(A)/ Ld. Departmental Representative that the assessee controls the pricing. Fare which appears on the OLA App and what Driver receives may be different due to discounts/ incentives offered by the assessee and therefore, it is the assessee who controls the Driver and the transportation service - The discounts offered by the assessee have no bearing on the Driver’s Fare. As far as incentives provided by the assessee to the Driver is concerned, on which tax is deducted at source by the assessee under section 194C, we are inclined to agree with the Ld. AR that it is merely one of the heads of income for the Driver under the Subscription Agreement, taxability of which has no bearing on the taxability of the payment of Fare to Driver. Even otherwise, as has been explained, it is a cost borne by the assessee out of Convenience Fee, i.e., its effective revenue. Distinction between suppliers of accommodation, airlines or food items and the assessee to state that the said suppliers carry out businesses that are independent from the platform on which they are listed - As each case must turn on its own facts and generalities cannot be accepted as valid legal propositions. We have already expressed our view that according to the contracts in place and the conduct of assessee, the assessee is an aggregator/ intermediary. The transportation services in question are provided by the Driver to the Rider and, therefore, the Driver’s Fare is payable by Rider either directly or through the assessee. There cannot be any liability on the assessee under section 194C since it is a mere intermediary. The Hon’ble Jurisdictional High Court in CIT v. Truck Operators Union [2011 (3) TMI 1017 - PUNJAB AND HARYANA HIGH COURT] and in CIT v. Cargo Linkers [2008 (3) TMI 619 - DELHI HIGH COURT] have also expressed the opinion that section 194C cannot be applied on intermediaries. DR contended that if the Rider cancels a trip request after the Driver has accepted it and has reached Rider’s location, the Driver is not guaranteed a Cancellation Fee - Even if it is assumed that the Driver does not get any Cancellation Fee, we do not find any merit in this contention, since no transportation services are provided in such a case. Even if it is assumed that a related party of the assessee has provided such options to the Driver, it still, in our considered view, would not saddle the assessee with a liability to deduct tax at source under section 194C. Thus there is no contract/ sub-contract between the assessee and the Driver under which the Driver provides any transportation services either to assessee or to any Rider on behalf of assessee, for which the Driver is paid by assessee. The contract for transportation services is between the Driver and the Rider and the assessee only facilitates the entire process in the capacity of an “aggregator”. Accordingly, the AO and the CIT(A) erred in concluding that the assessee was providing transportation services which was sub-contracted to the Driver and consequently the assessee was liable to deduct tax at source while disbursing Fare to the Driver - Decided in favour of assessee.
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