GoI issues notification of 'no tax deduction'

Trader's Association of Information & Technology (TAIT) had initiated its drive to protect business interest of sub-distributors, dealers, system integrators, and resellers across the country who deal in the selling of software through any format. TAIT's efforts have led to the clarification from the government with notification dated June 13, 2012 on one of the issues of levying a tax at single stage of the transaction. This drive started from the month of April 2012 with the active momentum in the month of May 2012.

The recognition of the efforts has resulted into clarifications from the government on one of the issues raised by TAIT. As per the government notification No. 21/2012 S.O.1323(E), dated 13-6-2012, the exercise of the powers conferred by sub-section (1F) of section 197A of the Income Tax Act, 1961 (43 of 1961), the central government hereby notifies that no deduction of tax shall be made on the following specified payment under section 194J of the Act, namely:

Payment by a person (hereafter referred to as the transferee) for acquisition of software from another person, being a resident, (hereafter referred to as the transferor), where:

(i) the software is acquired in a subsequent transfer and the transferor has transferred the software without any modification,

(ii) tax has been deducted:

(a) under section 194J on payment for any previous transfer of such software; or

(b) under section 195 on payment for any previous transfer of such software from a non-resident; and

(iii) the transferee obtains a declaration from the transferor that the tax has been deducted either under sub-clause (a) or (b) of clause (ii) along with the Permanent Account Number of the transferor.

This notification shall come in to force from July 1, 2012. Alok Gupta of ISODA said, "This notification is the result of immense hard work and dedication of like-minded people from the industry who are working for the cause of the betterment of the IT fraternity."

TAIT board has taken up to this issue at war footing level. It has mandated its two directors K R Chaube of Techlink Infoware and Nikesh Sakaria of CDP India to take the lead on the subject. During all this time TAIT has been very closely working with ISODA at all levels. In the recent ISODA board meeting, TAIT and ISODA decided to address the aforesaid subject very aggressively and put desire to have one-to-one meeting with the concerned officials in the ministry and advisory board members.

The association informed The DQ Week that it had addressed its views through letters to tax research unit of Ministry of Finance, IT Ministry, and Finance Ministry at the central government level. It has also put its views to NASSCOM, ASSOCHAM, MAIT, CII, FICCI, and IMC. It has lobbied hard with tax advisory committee members appointed by the Government of India on software taxation. TAIT, continuously, is in touch with NASSCOM and lobbying through it very actively. It has also put forward its representation to the BSA. On the other hand, to further raise the issue and spread awareness amongst the partner community at national and regional level, the association connected and informed 35 more regional IT associations, who have offered their unanimous support to this cause.