UBER INDIA SYSTEMS PVT. LTD VS.
JCIT (ITAT MUMBAI)
SA NO. 436&437/MUM/2018, DATED: 28-09-2018
Summarised Judgement ( Scroll for Complete Judgement)
S.
271C & 206AA Penalty: The assessee has made out a prima facie case that the
outcome of the appeal before the ITAT will directly impact the penalty
proceedings which are hurriedly being finalized by the authorities which may
entail huge liability by way of penalty on the assessee. The Revenue
authorities are accordingly restrained from passing any order imposing penalty
on the assessee so long as the appeal is pending before the Tribunal.
Introduction:
By
way of these stay applications, assessee seeks the stay of demand of
Rs.24,92,16,591/- and Rs.84,13,13,665/- for Assessment Years 2016-17 and 2017-
18 respectively.
Facts of the Case:
The
brief facts of the case are that the assessee is a company incorporated under
the provisions of the Companies Act, 1956 on 16.08.2013 and is engaged in the
business of providing marketing and support services to Uber B.V. a company
incorporated under the laws of Netherlands and is a tax resident of Netherlands.
During
the year, Uber B.V has engaged the appellant to provide various services under
Inter-Company Service Agreement. On 12.01.2018, a survey was conducted u/s
133A(2A) of the Income Tax Act, 1961 (in short „the Act‟) at the registered
office of the assessee-company and it was observed that the assessee has not
complied with TDS provisions which has resulted in non-compliance of provisions
of Sec. 194C of the Act on the payouts/dues to the Driver-Partners.
Accordingly, the assessee was treated in default and the above demands were
raised on the assessee for two assessment years as referred to above qua which
the assessee has moved these stay petitions.
Observation
of Court:
We
earnestly of the view that the demand raised by the revenue should be stayed
subject to deposit of Rs. 20.00 Cr till the disposal of appeal by the tribunal
so that the business of the assessee is not adversely impacted. We, therefore,
are staying the demand for both the years subject to payment of Rs.20 crores to
be paid in three installments two Rs. 6.5 Cr on 15.10.2018 and 15.11.2018 and
Rs. 7.00 Cr on 15.12.2018. The case of the assessee is also listed on an
out-of-turn hearing on 11.12.2018.
So
far as the penalty proceedings are concerned, the assessee has made out a prima
facie case in favour of the assessee proving that the outcome of the appeal
before ITAT will directly impact the proceedings which are hurriedly being
finalized by the authorities below, which may entail huge liability by way of
penalty on the assessee.
In our opinion, so long as the appeal is
pending before the Tribunal, the Revenue authorities should be restrained from
passing any order imposing penalty on the assessee u/s 271C and 206AA of the
Act however the proceedings may continue.
The
stay applications are disposed off as directed hereinabove and revenue
authorities directed not to pass orders imposing penalty u/s 271C and 206AA for
a period of six months from the date of this order or disposal of appeal
whichever is earlier.
========================================================
Complete Judgement
Uber India Systems Pvt. Ltd vs.
JCIT (ITAT Mumbai)
SA NO.
436&437/MUM/2018, Dated: September 28, 2018
IN
THE INCOME TAX APPELLATE TRIBUNAL
MUMBAI
BENCH “F”, MUMBAI
BEFORE
SHRI RAJESH KUMAR, ACCOUNTANT MEMBER AND
AMARJIT
SINGH, JUDICIAL MEMBER
SA
NOS. 436 & 437/MUM/2018 :
A.Ys
: 2016-17 & 2017-18
(arising
out of ITA NOS. 5862 &
5863/MUM/2018)
Uber
India Systems Pvt. Ltd., Vs. JCIT(TDS)(OSD)-(2)(3),
Unit
41/46, Floor 3 Paragon, Mumbai
Phoenix
Market City, LBS Marg, (Respondent)
Kurla
(W), Mumbai 400 070.
PAN
: AABCU6223H (Applicant)
Applicant
by : Shri J.D. Mistry/Hiten Chande
Respondent
by : Shri D.G. Pansari
Date
of Hearing : 28/09/2018
Date
of Pronouncement : 28/09/2018
ORDER
PER
RAJESH KUMAR, AM :
By way of these stay
applications, assessee seeks the stay of demand of Rs.24,92,16,591/- and
Rs.84,13,13,665/- for Assessment Years 2016-17 and 2017- 18 respectively.
2. The brief facts of
the case are that the assessee is a company incorporated under the provisions
of the Companies Act, 1956 on 16.08.2013 and is engaged in the business of
providing marketing and support services to Uber B.V. a company incorporated
under the laws of Netherlands and is a tax resident of Netherlands. During the
year, Uber B.V has engaged the appellant to provide various services under
Inter-Company Service Agreement. On 12.01.2018, a survey was conducted u/s
133A(2A) of the Income Tax Act, 1961 (in short „the Act‟) at the registered
office of the assessee-company and it was observed that the assessee has not
complied with TDS provisions which has resulted in non-compliance of provisions
of Sec. 194C of the Act on the payouts/dues to the Driver-Partners.
Accordingly, the assessee was treated in default and the above demands were
raised on the assessee for two assessment years as referred to above qua which
the assessee has moved these stay petitions.
3. The ld. AR
vehemently argued before the Bench that the provision of TDS u/s 194C of the
Act were not applicable to the assessee and therefore the order passed by the
CIT(A) is wrong and against the facts on records. The ld. AR submitted that the
assessee is not a “person responsible for paying” u/s 204 of the Act and thus
the provisions of section 194C of the Act. The said contention has not been
dealt by either of the authorities below as assessee is providing only support
services and acting as collection and remittance agent and disburses the
payment as per the instructions from Uber B.V.
The ld. AR also
submitted that considering the facts that all Driver-Partners are residents of
India having PANs/bank accounts and most likely earning below the threshold
limit as prescribed under Sec. 44AD of the Act and accordingly not liable to
tax at all .
The ld. AR further
submitted that the liability under Chapter XVII-B of the Act is a vicarious
liability, the same arises only if the payment results in taxable income in the
hands of the recipient and if the amount paid is not chargeable to tax in the hands
of the recipient, there is no obligation under Chapter XVII-B of the Act, as
held by the apex court in the case of GE India Technology Centre vs CIT, 327
ITR 456 (SC).
Therefore, fastening
the tax liability of Users/Riders/Driver-Partners on the assessee has put the
assessee to unnecessary burden and adversely impacted the business operations
of the assessee without necessary verification such as whether the
Driver-Partners have discharged their due taxes or not or whether they are
assessable or not.
The ld. AR further
submitted that even on merit, assessee has all probability to succeed in the
appeal before the ITAT as it has a very good case on merits and, therefore,
demand raised u/s 201(1) & 201(1A) should be stayed pending the hearing of
appeal by the hon‟ble tribunal.
The ld. AR also invited
the attention of the Bench to the penalty proceedings initiated u/s 271C and
206AA of the Act and stated that the JCIT(TDS) is in undue haste to impose the
penalty under the said proceedings/provisions even when the application of
provisions of tax deduction at source is disputed. The ld. AR prayed that the
assessee is apprehending imposition of huge penalty by the Revenue authorities,
which would jeopardize its entire business operations of the assessee.
The ld senior counsel
submitted the provisions of 194C are not applicable to the assessee as the
contract is between Uber B.V. and drivers and the assessee is only a
facilitator. The ld. AR submitted that in the interest of justice and fair
play, the said proceedings may kindly be stayed till the disposal of the appeal
by the Tribunal.
The ld Sr counsel
submitted that to stay the penalty proceedings pending the disposal of appeal
the outcome of which would decide whether the penalty is imposable or not. In
other words the penalty proceedings are consequential in nature. In support of
his contentions the ld Sr counsel relied on the decisions of Assistant
Commission of Income Tax Vs GE India Industrial (P) Ltd (2014) 46 taxmann.com
374(Gujarat) and CIT Vs Wander Pvt. Ltd (2014)44 taxmann.com 103(Bombay) and
submitted that the tribunal is well within its jurisdiction to direct the stay
of penalty proceedings as these proceedings are totally dependent upon the
outcome of the appeal which is sub-judice before this honble bench.
Lastly , the ld. AR
prayed before the Bench that the appeal may be listed on out-of-turn basis so
that it could be disposed off on merit forthwith.
4. The ld. DR, on the
other hand, strongly opposed the arguments of the ld. AR and submitted that the
demand has been created u/s 201(1) and 201(1A) of the Act for committing
default u/s 194C of the Act and until and unless the order is reversed by the
higher authorities, the demand of tax is lawfully due and the assessee should
be asked to deposit the same immediately.
On stay of penalty
proceedings u/s 271C and 206AA of the Act, the ld. DR prayed that the
proceedings are initiated as per the provisions of the Act and it would be
premature to stay the proceedings at this stage.
5. We have heard the
rival submissions and perused the material on record. It has been pleaded
before us that assessee is providing marketing and support services to a
foreign company, Uber B.V, which is incorporated in Netherlands. Assessee is
collecting the payments on behalf of the said company and making disbursements
to Driver-Partners as per the directions of Uber B.V, a Netherland company.
According to the Assessing Officer (TDS), assessee is liable to deduct TDS u/s
194C of the Act, which assessee has defaulted. The AO accordingly treated the
assessee in default and created demand on account of TDS and interest thereon
of Rs.24,92,16,591/- and Rs.84,13,13,665/- for Assessment Years 2016-17 and
2017-18 respectively.
At this juncture we are
not going into the merits of the cases and are confining ourselves to stay of
the demand and the penalty proceedings initiated upon the assessee u/s 271C and
206AA of the Act. The assessee has denied liability to deduct TDS u/s 194C of
the Act on the ground that assessee is not a “person responsible for making
payment” to the Driver-Partners as the contract is between Uber B.V and
Driver-Partners. The assessee is merely working on the directions of the said
company and passing on payments to the Driver-Partners as per the directions of
Uber B.V.
During the course of
hearing, the assessee submitted that the modus operandi of collecting the
payments by the assessee on behalf of the Netherland company which are made by
way of debit or credit cards or collecting by the Driver-Partners directly from
the customers. It was also stated that there are practical difficulties as it
is not possible for the assessee to collect TDS on the cash payments received
by the Driver-Partners directly.
During the hearing the
ld counsel for the assessee proved that the facts of the case were not properly
and thoroughly examined and verified by the lower authorities. We earnestly of
the view that the demand raised by the revenue should be stayed subject to
deposit of Rs. 20.00 Cr till the disposal of appeal by the tribunal so that the
business of the assessee is not adversely impacted. We, therefore, are staying
the demand for both the years subject to payment of Rs.20 crores to be paid in
three installments two Rs. 6.5 Cr on 15.10.2018 and 15.11.2018 and Rs. 7.00 Cr
on 15.12.2018. The case of the assessee is also listed on an out-of-turn
hearing on 11.12.2018.
Subject to the above
conditions the demand is stayed for a period of 180 days and the assessee would
not seek adjournment without any sufficient reason failing which the stay is
subject to vacation by the bench hearing the appeals.
5. So far as the
penalty proceedings are concerned, the assessee has made out a prima facie case
in favour of the assessee proving that the outcome of the appeal before ITAT
will directly impact the proceedings which are hurriedly being finalized by the
authorities below, which may entail huge liability by way of penalty on the
assessee. In our opinion, so long as the appeal is pending before the Tribunal,
the Revenue authorities should be restrained from passing any order imposing
penalty on the assessee u/s 271C and 206AA of the Act however the proceedings
may continue. While deciding so, we are supported by the decision of the
Jurisdictional High Court in the case of CIT vs Wander Pvt. Ltd., (2014) 44
Taxman.com 103 (Bombay) and ACIT vs GE India Technology Pvt. Ltd. (2014) 46
Taxmann.com 374 (Gujarat). We, therefore, respectfully following the decision
of the Hon’ble Gujarat High Court, direct the Addl. CIT (TDS)/revenue
authorities not to pass orders imposing penalty for a period of six months from
the date of this order or disposal of appeal by the tribunal which ever is
earlier, however, the proceedings may be continue during this period.
7. The stay
applications are disposed off as directed hereinabove and revenue authorities
directed not to pass orders imposing penalty u/s 271C and 206AA for a period of
six months from the date of this order or disposal of appeal whichever is
earlier.
The above decision was
pronounced in the open court in the presence of both the parties at the
conclusion of the hearing on 28th September, 2018.
Sd/- Sd/-
(AMARJIT SINGH)
(RAJESH KUMAR)
JUDICIAL MEMBER
ACCOUNTANT MEMBER
Mumbai, Date : 28th
September, 2018
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