Ola Not Liable To Deduct Withholding TDS On Payments To Drivers: ITAT

The Chandigarh Bench of the Income Tax Appellate Tribunal (ITAT) has held that Ola is not liable to deduct withholding TDS on the payments to drivers.The two-member bench of Sudhanshu Shrivastava (Judicial Member) and Vikram Singh Yadav (Accountant Member) has observed that the AO and the CIT(A) erred in concluding that the assessee was providing transportation services which were subcontracted to the driver and, consequently, the assessee was liable to deduct tax at source while disbursing fare to the driver.The appellant/assessee is a leading technology service provider in the cab hailing market in India to establish mobility for the Indian masses, and it provides an internet and mobile technology platform for cab hailing by passengers. The assessee operates under the brand name "OLA". It started operations in India in December, 2010. Currently, headquartered in Bengaluru, the assessee is a platform-based Indian cab hailing service company that has two separate OLA Apps; one for the rider to enable such a rider to choose his/her ride and the other one for the TSPs/Drivers to enable such drivers to accept or reject the ride chosen by the rider.As per the assessee, in the capacity of a mere facilitator, the assessee is the operator of the platform, which essentially serves as a repository of potential users and is capacitated, through advanced algorithms, to integrate rider preferences, in terms of the location of the rider, his/her vehicle requirements, and desired destination, with a suitable driver, willing to undertake the ride at that point of time. It is the claim of the assessee that only drivers having valid permits and duly authorised by the transport authorities can sign up with the assessee. The said drivers may be self-employed or may be working for a fleet operator owning multiple vehicles. As per the assessee, the assessee undertakes comprehensive authenticity checks and due diligence to ensure that the drivers and fleet operators, as the case may be, prescribe to certain standards in its endeavour to make sure that the rider is not directly, indirectly or even remotely harmed during the course of the ride.The assessee charges a "convenience fee," being a percentage of the total ride fare charged to a passenger for availing the technology services offered by the assessee: door-to-door service, wi–fi access, customer support, and cashless payment options.The assessee submitted that the entire case of the Department rests on the erroneous assumption that the assessee is in the business of providing transportation services, and further that the services are provided through a sub-contract with third party drivers. It was submitted that it was also the case of the Department that these third party drivers performed the transportation services under the total control and supervision of the assessee, attracting withholding obligations under section 194 C of the Income Tax Act.Section 194C requires the person responsible for paying any sum to a contractor for carrying out any "work" in pursuance of a "contract" to deduct 1% therefrom. The definition of "work", for the purposes of attracting the rigours of section 194C, includes "the carriage of goods or passengers by any mode of transport other than by railways", or simply put, "transportation services".The ITAT noted that section 194C would be applicable where the payments in question are made by the person responsible for paying, under a contract, to another person called the "contractor." It is clear from the contracts between the assessee and the driver and the assessee and the rider, all of which are unrelated, that the underlying contract for transportation service is between the driver and the rider. The assessee merely facilitates the entire process on its OLA App."The payment in question is the fare that the driver is entitled to for rendering transportation services to the rider, and, accordingly, in our view, the person responsible for paying in such a case is the rider alone and not the assessee who merely acts as an intermediary to facilitate electronic mode payments," the ITAT said.Case Title: ANI Technologies Private Limited Versus DCITCitation: ITA No. 163/CHD/2020Date: 16.09.2022Counsel For Appellant: Advocate Deepak Chopra, Anmol Anand, Deepak Aggarwal, Priya TandonCounsel For Respondent: CIT DR Vivek NangiaClick Here To Read The Order

Ola Not Liable To Deduct Withholding TDS On Payments To Drivers: ITAT

Mariya Paliwala

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