TIOL-DDT 207 · the untouched capture
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<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> <b><font color="#6633CC" size="3">TIOL-DDT
207</font><br>
22 09 2005<br>
Thursday</b></font></p>
<p align="center"><font color="#006633" size="2" face="Verdana, Arial, Helvetica, sans-serif">
<b>CBEC wants to tax maintenance or repair or servicing of computer software</b></font></p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> Board had issued
an alarmingly logical circular in 2003 - Circular No. 70/19/2003-S.T., dated
17-12-2003. Board had noted that <br>
<br>
• repair is not of tangible goods but that of intangible program/software
which is in installed condition and thus the maintenance and repair of software
is not maintenance and repair of ‘goods’<br>
<br>
• Further an exemption has been granted to maintenance or repair services
in relation to computer, computer systems and computer peripherals vide Notification
<b>No. 20/2003-S.T</b>., dated 21-8-2003<br>
<br>
• As such computer software would form a part of computer systems would
be covered under this notification<br>
<br>
• Under the category of ‘consulting engineer’ vide Notification
No.<b> 4/99-S.T</b>., dated 28-2-99 taxable service provided to any person
by a consulting engineer in relation to computer software is exempted.<br>
<br>
• The definition of “Business Auxiliary Service” also specifically
provides that; inter alia, maintaining of computer software is covered in
the Taxable service, which is excluded from the scope of business auxiliary
service.<br>
<br>
• <b>It is to clarify that maintenance of Software is not chargeable
to Service Tax.</b><br>
<br>
Interestingly the above referred notifications – 20/2003 and 4/99 were
rescinded on 9.7.2004 and 10.9.2004. Then what happened? In an interesting
article <a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=newsch/guest/rssharma/rssharma009.htm">COMPUTER
SOFTWARE SERVICE NOT TAXABLE EVEN AFTER WITHDRAWAL OF EXEMPTION</a>! <br>
<br>
Which we carried immediately after the 2004 Budget, Mr. R S Sharma, our Senior
Editor said,<br>
<br>
<b>“JUDGING</b> the impact of a Notification is not everybody’s
cup of tea. What looks to everybody, including TRU as “Withdrawal of
Exemption to Engineering Consultancy Services in relation to computer software”
by rescinding of exemption Notification 4/99-ST dated 28.02.1999; does not
really make the said service provided by a Consulting Engineer liable to service
tax.”<br>
<br>
It was pointed out that the withdrawal of the exemption notification does
not really make the service taxable. With or without an exemption maintenance
and repair would not have been taxable as Board rightly said that software
was not tangible goods and so not covered under repair of goods. Then came
the famous judgement of the Supreme Court in Tata Consultancy case where it
was held that software was goods. The TCS judgement came in November 2004
and the Government has reacted – now after ten months. <br>
<br>
The Board proposes to issue a circular to the effect that in view of the TCS
judgement, <br>
<br>
<b>It is therefore clarified that maintenance or repair or servicing of all
computer software is taxable under section 65</b><br>
<br>
And the Board proposes to supersede all previous instructions on the subject.
In order to avoid silly litigation, the Board should clarify that this circular
has only prospective effect. Otherwise overactive officers are sure to shoot
off Show Cause Notices. </font></p>
<p align="center"><font color="#006633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Income
Tax – date for return extended</b></font></p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The due date
for filing of Quarterly Return of Payment of Interest to Residents without
Deduction of Tax at Source is extended to 31st of December, 2005.<br>
<br>
<a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=wnew/itnot.htm">ORDER
F.No.385/35/2005-IT(B) Dated 19th September, 2005 </a></font></p>
<p align="center"><font color="#006633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Farewell
party to retiring Customs and Excise Chief – eye of a storm</b></font></p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Customs Chief
is to retire in a few days. Lavish parties are planned for him at state cost
and by contributions (not all voluntary) from officers. The news of this vulgar
spending is leaked to the press and an angry Chief refuses to attend the parties.
<br>
<br>
No, this did not happen in India. The whole controversy is about the Malaysian
Customs Chief whose extended tenure ends on October 3rd and the party is said
to cost 5 Million RM. In Dollar terms this works out to about 1.5 Million
Dollars. This million dollar party has generated enough heat in the country
that the Government has ordered an investigation. </font></p>
<p align="center"><font color="#006633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>US
Customs Chief – another controversy</b></font></p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> <img src="http://www.taxindiaonline.com/RC2/image/julie_myers.jpg" alt="Julie Myers, 36" width="142" height="183" border="1" align="left">This
young beautiful lady is all set to head the US Customs if President Bush has
his way. But the US press is not impressed. She is only 36 and a lawyer with
not much of experience and hardly any experience in Customs or Border Protection.
<br>
<br>
Julie Myers is just 36 and is almost sure to take over the important assignment.
Customs and Border Protection in the post - 9/11 scenario is a very important
department of the US administration,. More for security than for revenue.
<br>
<br>
At her nomination hearing last week Myers remarked, “I realize that
I'm not 80 years old, I have a few grey hairs, more coming, but I will seek
to work with those who are knowledgeable in this area, who know more than
I do."</font></p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><br>
<br>
<font color="#FF6666"><b>Until tomorrow with more DDT<br>
<br>
Have a nice day. <br>
<br>
Mail your comments to</b></font> <a href="vijaywrite@taxindiaonline.com">vijaywrite@taxindiaonline.com
</a></font> </p>
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