In a partial reprieve for Uber India, the Income Tax Appellate Tribunal (ITAT) has granted a stay against a tax demand levied on the cab-hailing company and restrained the authorities from imposing any penalty.

Uber had approached the tribunal after income-tax authorities carried out a survey and alleged that the company had not deducted tax at source on payments made to driver-partners.

The tribunal partially stayed the demand, subject to Uber India depositing Rs 20 crore in three instalments pending disposal of the appeal. The main issue of applicability of tax deduction at source on payments will now be heard on December 11.

The company submitted that the contract is between Uber BV, Netherlands, and the partner-drivers. Uber India is therefore not “responsible for paying” and not liable to deduct tax on payments to drivers, it said.

The tribunal restrained the department from passing any order imposing penalty as long as the matter is pending with it. The stay is valid for six months from the date of the order disposing of the appeal. Penalty proceedings, however, will continue.

The income tax department raised a tax demand of Rs 24.92 crore for assessment year 2016-17 and Rs 84.13 crore for AY2017-18 and issued a notice initiating penalty proceedings. The penalty amount levied will be equal to the quantum of tax deducted at source.

Uber India Systems Pvt Ltd. provides marketing and support services to cab aggregator Uber BV. These include acting as the collection and remittance agent for disbursing amounts to partner-drivers on behalf of Uber BV.

The company sought a stay on the tax demand, pending adjudication of the matter. It also requested that penalty being consequential in nature, the authorities be restrained from passing any order imposing penalty until the outcome of the appeal.

“With new and evolving business models, tax issues are bound to get more complex. It is imperative that the overall business dynamics, along with its impact on the economy and associated administrative burden, is taken into account while taking decisions on revenue collections,” said Vikas Vasal, national tax leader at Grant Thornton India.

Vasal said it is time that dispute resolution mechanisms are strengthened so that businesses have clarity and certainty on the likely tax impact of their business decisions.