Thursday, July 07, 2011

The delay is on account of computer system blocking the refund - reply to RTI query for Income Tax Refund

My Income tax refund saga has spilled over to other posts in recent past. So, here I would like to share certain points to be kept in mind while making a RTI (Right to Information) application.

Brief History
For Assessment Year 2006-07 and 2007-08 my case was taken up for scrutiny and Assessing Officer  passed orders u/s 143(3) for refund of Income tax on 18-11-2008 and 31-8-2009 respectively. Since I did not receive the refund within the prescribed limit of 1 month from the date of order, I wrote number of letters to the ITO. I did not get a single reply. Hence I visited them personally 3 to 4 times but every time they sent me back with mis-leading replies e.g., system is blocked because you have one more PAN number (this PAN was already cancelled by ITax long back), we will have to prepare the cheque manually and so on.

RTI Application
I read in one news paper that income tax refund is covered under RTI Act. So, I said - let's try this out. And with about 3 months of effort I got the Refund with Interest. Cost incurred - Rs.24/-!! In the process there were many things I learnt. Here is the list:

1. Making RTI query to a Central Government is different from State Government. For Central Government one has to get either Demand draft, Pay Order or Indian Postal Order called IPO (available from Post offices) of Rs.10/-. But, to my surprise I had to visit at least 5 post offices before I could get it. Most of post offices are out of stock and have no information as to when they will get. One hint, ask for Rs.5/-, Rs.20/- IPO. One can attach Rs.20/- IPO instead of Rs.10/-; or 2 x Rs.5/- IPO. You will have to pay Rs.2/- commission on Rs.10/- IPO - although printed value of commission on IPO is Rs.1/-. That's massive 20% commission! May be RTI is required to un-earth a scam in to commission also!!

Format for application is not fixed but it should cover information like Name of applicant, subject matter of information, period for which information is required, and description of information required. While submitting the RTI one is required to mention name of payee. Finding this information is a big problem. For Income tax, I learnt that it is "Accounts Officer, Income Tax Dept, Govt of India".

For RTI query to State Government one has make payment by purchasing Non-judicial stamps of Rs.10/- and affix on the RTI application. Also, format for each State government dept is different and available from dept or web site. Earlier, post offices were accepting cash payments but it has stopped now.

2. Before you make an application, you will have to find out who is Public Information Officer (PIO) of the department. Generally this information should be readily available; and most government web sites claims to give this information. But, most of the time you will find that either link is not working or this information is just not given anywhere or some similar problem.

For Income tax refund, after great deal of effort, I found out that my Assessing Officer (AO) - who is supposed to assess my Income tax Return is the designated Public Information Officer. So, see the fun; the person against whom I have a complaint is the person who is going to give the answer! Hence RTI application for Income tax refund should be addressed to PIO, Assessing Officer (ITO/AC), Income Tax Ward / Circle No. ITO-xx(x)-x, his address with PIN code.

3. One can submit the RTI application at Post offices i.e., post office will accept your RTI application and forward it to the addressed PIO i.e., government officer free of cost. So, submission of RTI application as Post office saves us cost of sending application by hand delivery / Registered AD / Speed Post. List of Post offices accepting RTI application is put on India Post web site (http://www.indiapost.gov.in/). But I found information is not updated for a long time i.e., many more post offices accept RTI applications that list given there. Note that one should not send RTI application through courier. Also, on-line application for RTI is not accepted, so far.

4. Do not write questions against 'description of information required'. Instead, write that my questions are given in annexure-1. In annexure-1 write questions in a tabular form - each question serially numbered. Do not ask more than one question against each serial number.

5. In RTI query, remember that one ask for "information" only i.e., one can not ask "why" certain thing was not done. For example, one can not say 'Why no action is taken against Assessment Officer?' Instead one can ask 'Give details of reasons recorded for not taking action against the assessment officer for dereliction of duty'.

6. It is extremely important to draft the application properly. If not done with care, government departments have mastered the art of giving evasive replies. So, it is important that a knowledgeable person helps you to draft the text of the application. In fact, from my experience I can say that one requires a lawyer to draft it.

Also, remember that for sensitive information like Income tax refund, one has to make RTI application himself only. If not done information would be denied. Also, one has make query in individual capacity clearly stating that "I - , citizen of India, hereby apply for following information under the RTI Act 2005." One can not make application on behalf of firm, organization etc.

For my RTI application, I had gathered few drafts available on various sites for Income tax refund. After combining few of them I made an initial draft. I showed it to a group of helping people from "Tarun Mitra Mandal". They have a set of volunteers in various parts of Mumbai city, who give free advice on one particular day of the week, generally in the evenings/night time. More information about them can be found at http://www.thetmm.org/. Don't be fooled by their simple website. They are very knowledgeable and truly helpful people giving a very useful service free of charge.

In stead of going in to lot of details, in summary, I had to make 2 RTI applications. First got me the payment of refund without any interest. Second one got me the interest for late payment at 6% pa, calculated from 1st April of relevant Assessment year. For example, if AY is 2006-07 and interest becomes due from 1-4-2006.

Following table has text of my queries along with replies I received from the Income-Tax department and  last column says what I've learnt:

First RTI Application

Info. Asked by RTI application Dated
15-3-2011
Reply
from ITax dated
15-4-2011
Lesson learnt (How to anticipate evasive answers and framing clever questions)

1. In how many days is the Income Tax Department supposed to refund the tax amount
assessed in the Assessment Order u/s 143(3); and if refund is not given
within the timeframe; give details of concerned person (name, address and contact no) and what actions are taken against the concerned person?
Within
one month from the date of order of assessment u/s 143(3)
Since
questions are not separately numbered, answer is given only to first part.
So, each question should be separately numbered. Government officials are
good at giving incomplete / partial answers.

2. Please give status and progress report on complaint letters written on
31-3-2010, 20-5-2010, 21-9-2010 and 25-11-2010.
Your
complaint letters have been processed and your refund for AY 2006-07 and AY 2007-08 have been issued by this office through refund cheque dt. 1-4-2011
Answer given is as of 15-4-2011; and not as of 15-3-2011 i.e., when question was
asked. So, we should ask “Please give status and progress report as on RTI
query date (15-3-2011) on complaint…” Worst part is one cheque bounced back with reason "Reason(70): advice not received" I had to write a letter to the AO with copy of bounced cheque and cheque return advice and wait for 1 week before I got the payment from the bank.

3. If refund payment is made to the assessee, please give details of the same viz.,
Name, designation, address and contact phone no. of the concerned officer of Income tax department and Agent/Refund Banker, name and address of assessee
where cheque was sent, mode of dispatch viz., ordinary post /speed-post/registered post/ECS etc; date of dispatch, proof of dispatch, details of cheque/ECS viz., name of the bank, branch, date of cheque/ECS and
amount, date of delivery, date of encashment of cheque/ECS, if cheque is returned un-delivered – reason for non-delivery.
Refund
for A.Y. 2005-06 & 2007-08 has been sent by refund banker cheque, Advice
No.ITC/A7 812528 & 812529 dated 01/04/2011. The same is sent by
Registered speed post on 05/04/2011 on the address provided by you i.e., xxx,
Mumbai-xx.
Name: XY
Designation: ITO MM(N)-P
Office address: xxx,xx
Tele:xxx
Here, although Refund was not given on date of RTI application; AO made the Refund cheques without Interest u/s 244A and sent out. Also he did not send advice
No.ITC/A7 along with the 2 cheques. And he cleverly replies that Refund has
been sent. So, to not to allow this type of reply, one should mention
clearly “Provide status of Refund as on date of RTI query and not as on date
of your reply”


If question 2 was properly framed answer to this question would have been
negative.

4. In case of non-delivery of refund cheque for any reason; what steps are taken by
Income tax department and Agent/Refund banker to inform the assessee about
the non-delivery of refund cheque? In case, no action is taken – please
provide the name, address and phone number of person from whom assessee can
get the refund cheque along with procedure for claiming such refund cheques and in what time period he is supposed to get the refund cheque.
N.A.No comment.

5. In case, no refund payment is made to the assessee please give following
details:

a. Name, Designation, Office Address, Office Telephone Number, Mobile Numbers
(in case mobile provided and paid for by the office) of the officer of the
Income Tax department who is responsible for the inordinate delay of Income tax refund, action taken for dereliction of duties and if no action is
initiated, reasons thereof be made known to me.
b. Give details of number of days in which this officer is supposed to issue the refund payment to the assessee as per rules/procedures of Income tax
department
c. Please inform me the reasons for non-payment of refund payment under Sec
4(1)(d) of the RTI Act, since I am an “affected” person.
d. By which date I should expect to get the refund payment along with interest due to me.
e. Give detailed calculation of interest mentioning no of days and interest rate,
which assessee is entitled to receive for the late payment of refund amount.
[No reply. In fact, reply for 6 is given at 5]Here question is not answered at all. I wish question
was written as given below:

“In case, Income tax refund is not done to the assessee on or before date of
RTI query (15-3-2011) please give following details:..”


Any way, this seems to be a standard technique to avoid giving reply to
uncomfortable questions. Go for appeal.  In appeal, demand Penalty
for not giving answer
e.g., “I demand imposition of Penalty under Section
20 of the RTI Act, at the rate of Rs. 250.00 for every day of delay (subject
to a maximum of Rs. 25,000.00) from the date the information was due
(15-4-2011) till the date the information is actually given to me.”

6. The Name, Office Address, Office telephone number and Mobile Number of the Higher
Officer to whom a First appeal will lie under Sec 19(1) of the RTI act 2005
Name: GH
Designation: Joint Commissioner of Income Tax Rg M (N)
Office Address:xx,x
Tele: xx
No
comment


Second RTI Application

Details of Further Information required through RTI application dated 18-5-2011Reply
from Income Tax Dept dated 21-6-2011
Lesson learnt (How to anticipate evasive answers and framing clever questions)

1. If refund is given after one month of assessment u/s 143(3) then as per Income tax act
(a) give details of rate of interest  payable for the late payment
(b) from which date to which date interest becomes payable to the assessee.
(c) Reasons recorded for not paying interest along with the income tax refund
amount.

(d) give detailed calculation of Interest payable to assessee particularly
mentioning rate of interest, period for which interest is paid (start date
and end date) and number of days for which interest is payable for AY 2006-7 and 2007-08.
(a)
Rate of Interest is 0.5%

(b) From 1st April of the relevant A.Y. to the date of refund
order

(c) The delay is on account of computer system blocking the refund

(d) As per ITNS 150 enclosed herewith.
(a) 0.5% is per month and not per annum. Confusing. Isn't it?

(b) We
should try to get exact date e.g., 1-4-2006/2007 to 1-6-2011

(c) Technically this is a wrong answer. We should expect this answer and cleverly frame question e.g., “Please note evasive reply like ‘delay is on
account of computer system ...’ etc. are not acceptable.”


(d) ITNS 150 does not mention rate of interest, period, no. of days (we
should write months).

2. (a) Reasons recorded for undue delay in taking action on complaint letters.
(b) Name and designation of officers responsible for the same.
(c) Whether any disciplinary action taken the responsible officers or not. If not, reasons recorded for the same.
(d) Name and designation of senior officers authorized to take action against the
responsible officers for delay.
(a) The
delay is on account of computer system blocking the refund.

(b) Not applicable

(c) Not applicable

(d) The Jt. Commissioner of Income Tax-Rg.NN(M) Mumbai
(a) Absolutely wrong answer.

(b) wrong answer

(c) wrong answer

(d) No comment

One should appeal against this answer. Or expect this answer & cleverly
frame question (read above remark)

3. Give details of total number of pending income-tax refunds overdue by 1 month from
your office
[No reply. In fact, reply for 4 is given at 3 and so on. So, last reply is for 5]In appeal, demand Penalty for not giving information.

4. Give details of number of orders passed but refunds still lying in custody of your
office and dispatch clerk and Refund Banker/agency for more than 1 month
No Day to day progress report maintained since refund order are issued on computer
through Refund Banker. SBI.
Evasive
answer. Go for appeal for not giving correct answer.

5. Whether any disciplinary action is taken against the responsible income tax officer, dispatch clerk and Refund Banker/agency for not refunding the amount in time. If no action is taken reasons recorded for the same.Not applicable.Why not
applicable? Wrong answer. Go in appeal.

6. Give name and designation of senior officer to look after and supervise the proper and timely dispatch of refund orders along with interest to the assessee.The
Incumbent Assessing Officer Shri XY, ITO-NN(M)-P. Mumbai. Under the
supervision of Shri PQ, Jt. CIT-Rg.NN(M). Mumbai.
No comment.









7. One may ask me why I did not go for Appeal rather than choosing to make second RTI application, asking for 'further information'. In fact, I had prepared the Appeal but on careful thinking and advice from a welwisher, I decided against it. Main reason behind this decision was that purpose of my RTI application was not to expose inefficiency but to get result. As long as I got the result that I wanted, I could not ask for more.

Let me have your feedback.

Monday, June 13, 2011

TringMe software (Voice over Inernet) for Blackberry

When i got hooked to Blackberry, I looked for skype or an application similar to skype, which will allow me to make internet calls using Blackberry. Of course, there were some claims but none of them were found working. And, then I learnt that that technically there is some issue because of which it is not possible to write such application on Blackberry. Unless, of course, in newer OS such technical limitation was overcome.

This was bit difficult to digest because I had seen skype working flawlessly on recent phenomenon called iPhone. Any way, tech world being what it is, we can't do much.

So, it was a surprise when I learnt that TringMe, a India based start-up had developed an application that would enable a Blackberry handset with any BB OS version to make IP calls over Wifi and 3G. When I read more, it even claimed that it would even work for those data plans where only e-mails and IM were allowed i.e., GPRS/browser support was missing. I said to my self, that's like a real Indian genius! Let me try.

Immediately I set down to download tringme application for my blackberry handset. I have basic BIS plan with e-mail and IM only i.e, no GPRS/Browser. After installation, it showed me my virtual phone number and so on. Icon got setup on the screen and I was anxious to get started with few free phone calls. Unfortunately my BB handset (8310) does not support Wifi and 3G. When I had got it, I thought wifi is not going to be useful, so I had opted for a handset with GPS! But technology changes fast, and in no time Wifi became ubiquitous.

So, I thought TringMe is a god-sent application that will allow me to make IP calls. But, before I started, I thought let me check if everything else is working alright. And to my surprise, I found that my Google Talk, Yahoo Messenger and Hotmail Messenger were not able to connect to the server. Upon re-try I saw message on all of them that 'you have not subscribed to this service' or 'service book entries are missing'. I don't remember exact message.

So, after some thought I realised that it could be TringMe. So, I deleted TringMe from the phone. And, all 3 IMs started working. That's it. I'll not try TringMe once again, unless website specifically says that it does not hamper working of IMs. Also, I noticed that site assumes that everyone knows how to download and install BB application, even when the user is having basic BB plan with e-mail and IM support!

Saturday, June 11, 2011

Problems with MTNL's Triband Internet Connection

About 15 days back, we experienced totally black-out for almost 3 days with MTNL's internet connection. Upon inquiry we found that their Fibre Channel cable was damaged by a utility company while doing some road repair work. Ok. We understand this happens sometimes.

But, for past 8 to 10 days, kind of problems we have been facing with MTNL's triband is making us crazy. Almost every day some time or other, suddenly for 4 to 6 hours Internet connection starts behaving bad. For some days it has been 'web page cannot be displayed'. Today it is able to load only certain sites e.g., google, google mail, yahoo mail, mtnl, iit bombay, stock holding corporation, blogger etc. It's not able to open sites like irctc, saraswat bank, most links on google search, indian passport, kingfisher club etc.

Talked to various people at MTNL including their server room people. They are clueless. And, to make it worse, today is saturday. So, they will take it up on Monday! Same thing had happened during Fibre Cable damage problem.

I remember, I had faced a wierd problem about 1 year back. I was not able to visit IRCTC website for railway booking. I called up MTNL's help line and after much argument they confirmed that there was an issue with their DNS server; and they are working on it. Since I was in hurry I used Cleartrip's railway booking (which had just started, and I found it to be much better than IRCTC). Any way, after that it's more or less working well.

It should be mentioned here that apart from this few incidents, MTNL's triband internet has been extremely good and reliable.

Monday, May 02, 2011

Convocation speech by actor Balraj Sahni in 1972 at Jawaharlal Nehru University

Yesterday my wife pointed out to me an excellent article in Gujarati News Paper - Janmabhoomi Pravasi - about a convocation speech given by film actor Balraj Sahni in 1972. I wondered, what would an actor - however great his acting would have been - would say which would help any one to learn something new or encourage new graduates to go out and conquer the world. I remembered great convocation speech by Subrato Bagchi - 'Go kiss the world' and few more.


It was only after I read the condensed speech and supporting material that I realised how great a person had been Balraj Sahni - ordinarily known as a good film actor. I told my wife that his speech reminds me of speeches by past President, Shri Abdul Kalam. Also, I was reminded of great articles written by Salim Khan, an actor and father of famous hero Salman Khan from Bollywood.


Balraj Sahni was a post graduate in English literature and taught English and Hindi at Shantiniketan and served as a  radio announcer in BBC at London before he forayed in to acting.


The speech is rather long and is reproduced below. For impatient readers, I would like to high light few points that touched my heart:

1. He spoke from his heart and that too only about those things that he had thought and experienced himself.

2. Excessively busy people tend to get cut off from all the currents of life and not only does he sacrifice the pleasures of normal family life, but he also has to ignore his intellectual and spiritual needs. (Most busy and successful people do not realise this and most part of their life passes away like a flash of light and suddenly they find themselves at the end of road, veiling that they did not look after their own intellectual and spiritual needs. Too sad.)

3. Although days are slavery have been over more than half an century ago, Indian mind is still enslaved. It has to break free and learn to think independently. (Particularly I feel very sad when I see thousands of young, bright and energetic people who have become slaves of overseas MNCs and our pathetic educational and political system.)

4. Even after lapse of 40 years after he gave this speech, situation has not changed much. What he said is still true today. Isn't a great shame?

I won't take much of your time. Time to read the entire speech.

Balraj Sahni's Convocation Address at Jawaharlal Nehru University

New Delhi, 1972

About twenty years ago, the Calcutta Film Journalists' Association decided to honour the late Bimal Roy, the maker of Do Bigha Zameen and us, his colleagues. It was a simple but tasteful ceremony. Many good speeches were made, but the listeners were waiting anxiously to hear Bimal Roy. We were all sitting on the floor, and I was next to Bimal Da. I could see that as his turn approached he became increasingly nervous and restless. And when his turn came he got up, folded his hands and said, “Whatever I have to my I say if in my films. I have nothing more to say,” and sat down.

There is a lot in what Bimal Da did, and at this moment my greatest temptation is to follow his example. The fact that I am not doing so is due solely to the profound regard I have for the name which this august institution bears; and the regard I have for yet another person, Shri P.C. Joshi, who is associated with your university. I owe to him some of the greatest moments of my life, a debt which I can never repay. That is why when I received an invitation to speak on this occasion, I found it impossible to refuse. If you had invited me to sweep your doorstep I would have felt equally happy and honoured. Perhaps that service would have been more equal to my merit.


Please do not misunderstand me. I am not trying to be modest. Whatever I said was from my heart and whatever I shall say further on will also be from my heart, whether you find it agreeable and in accordance with the tradition and spirit of such occasions or otherwise. As you may know, I have been out of touch with the academic world for more than a quarter of a century. I have never addressed a University Convocation before.


It would not be out of place to mention that the severance of my contact with your world has not been voluntary. It has been due to the special conditions of film making in our country. Our little film world either offers the actor too little work, forcing him to eat his heart out in idleness; or gives him too much --so much that he gets cut off from all other currents of life. Not only does he sacrifice the pleasures of normal family life, but he also has to ignore his intellectual and spiritual needs.

In the last twenty-five years have worked in more than one hundred and twenty five films. In the same period a contemporary European or American actor would have done thirty or thirty-five. From this you can imagine what a large part of my life lies buried in strips of celluloid. A vast number of books which I should have read I have not been able to read. So many events I should have taken part in have passed me by. Sometimes I feel terribly left behind. And the frustration increases when I ask myself how many of these one hundred and twenty-five films had anything significant in them? How many have any claim to be remembered? Perhaps a few. They could be counted on the fingers of one hand. And even they have either been forgotten already or will be, quite soon.

That is why I said I was not being modest. I was only giving a warning, so that in the event of my disappointing you, you should be able to forgive me. Bimal Roy was right. The artist's domain is his work. So, since I must speak, I must confine myself to my own experience to what I have observed and felt, and wish to communicate. To go outside that would be pompous and foolish.


I'd like to tell you about an incident which took place in my college days and which I have never been able to forget. It has left a permanent impression on my mind.


I was going by bus from Rawalpindi to Kashmir with my family to enjoy the summer vacation. Half-way through we were halted because a big chunk of the road had been swept away by a landslide caused by rain the previous night. We joined the long queues of buses and cars on either side of the landslide. Impatiently we waited for the road to clear. It was a difficulty job for the P.W.D. and it took some days before they could cut a passage through. During all this time the passengers and the drivers of vehicles made a difficult situation even more difficult by their impatience and constant demonstration. Even the villagers nearby got fed up with the high-handed behaviour of the city-walas.


One morning the overseer declared the road open. The green- flag was waved to the drivers. But we saw a strange sight. No driver was willing to be the first to cross. They just. stood and stared at each other from either side. No doubt the road was a make-shift one and even dangerous. A mountain on one side, and a deep gorge and the river below. Both were forbidding. The overseer had made a careful inspection and had opened the road with a full sense of responsibility. But nobody was prepared to trust his judgment, although these very people had, till yesterday, I accused him and his department of laziness and incompetence. Half an hour passed by in dumb silence. Nobody moved.


Suddenly we saw a small green sports car approaching. An Englishman was driving it; sitting all by himself. He was a bit surprised to see so many parked vehicles and the crowd there. I was rather conspicuous, wearing my smart jacket and trousers. "What's happened?" he asked me.


I told him the whole story. He laughed loudly, blew the horn and went straight ahead, crossing the dangerous portion without the least hesitation.


And now the pendulum swung the other way. Every body was so eager to cross that they got into each other's way and created a new-confusion for some time. The noise of hundreds of engines and hundreds of horns was unbearable.


That day I saw with my own eyes the difference in attitudes between a man brought up in a free country and a man brought up in an enslaved one. A free man has the power to think, decide, and act for himself. But the slave loses that power. He always borrows his thinking from others, wavers in his decisions, and more often than not only takes the trodden path.

I learnt a lesson from this incident, which has been valuable to me. I made it a test for my own life. In the course of my life, whenever I have been able to make my own crucial decisions, I have been happy. I have felt the breath 'of freedom on my face. I have called myself a free man. My spirit has soared high and I have enjoyed life because I have felt there is meaning to life.


But, to be frank, such occasions have been too few. More often, than not I had lost courage at the crucial moment, and taken shelter under the wisdom of other people. I had taken the safer path. I made decisions which were expected of me by my family, by the bourgeois class to which I belonged, and the set of values upheld by them. I thought one way but acted in another. For this reason, afterwards I have felt rotten.


Some decisions have proved ruinous in terms of human happiness. Whenever I lost courage, my life became a meaningless burden.

I told you about an Englishman. 1 think that in itself is symptomatic of the sense of inferiority that I felt at that time. I could have given you the example of Sardar Bhagat Singh who went to the gallows the same year. I could have given you the example of Mahatma Gandhi who always had the courage to decide for himself. I remember how my college professors and the wise respectable people of my home town shook their heads over the folly of Mahatma Gandhi, who thought he could defeat the most powerful empire on earth with his Utopian principles of truth and non-violence. I think less than one per cent of the people of my city dreamt that they would see India free in their lifetime. But Mahatma Gandhi had faith in himself, in his country, and his people. Some of you may have seen a painting of Gandhiji done by Nandlal Bose. It is the picture of a man who has the courage to think and act for himself.


During my college days I was not influenced by Bhagat Singh or Mahatma Gandhi. I was doing my M.A. in English literature from the most magnificent educational institution in the Punjab-the Government College in Lahore. Only the very best students were admitted to that college. After independence my fellow students have achieved the highest positions in India and Pakistan, both in the government and society. But, to gain admission to this college we had to give a written undertaking that we would take no interest in any political movement-which at that time meant the freedom movement.


This year we are celebrating the twenty-fifth anniversary of our independence. But can we honestly say that we have got rid of our slavish mentality--our inferiority complex?


Can we claim that at the personal, social, or institutional level, our thinking, our decisions, or even our actions are our own and not borrowed? Are we really free in the spiritual sense? Can we dare to think and act for ourselves, or do we merely pretend to do so-merely make a superficial show of independence.


I should like to draw your attention to the film industry to which I belong. I know a great many of our films are such that the very mention of them would raise a laugh among you. In the eyes of educated intelligent people, Hindi films are nothing but a tamasha. Their stories are childish, unreal, and illogical. But their worst fault, you will agree with me, is that their plots, their technique, their songs and dances, betray blind, unimaginative, and unabashed copying of films from the west. There have been Hindi films which have been copied in every detail from some foreign film. No wonder that you young people laugh at us, even though some of you may dream of becoming stars yourselves.


It is not easy for me to laugh at Hindi films. I earn my bread from them. They have brought me plenty of fame and wealth. To some extent at least, I owe to Hindi films the high honour which you have given me today.


When I was a student like you, our teachers, both English and Non-English, tried to convince us in diverse ways that the fine arts were a prerogative of white people. Great films, great drama, great acting, great painting, etc., were only possible in Europe and America. The Indian people, their language and culture, were as yet too crude and backward for real artistic expression. We used to feel bitter about this and we resented it outwardly: but inwardly we could not help accepting this judgment.


The picture has changed vastly since then. After independence India has made a tremendous recovery in every branch of the arts. In the field of film making, names like Satyajit Ray and Bimal Roy stand out as international personalities. Many of our artistes, cameramen and technicians compare with the best anywhere in the world. Before independence we hardly made ten or fifteen films worth the name. Today we are the biggest film producing country in the world. Not only are our films immensely popular with the masses in our own country, but also in Pakistan, Afghanistan, Iran, the Eastern Republics of the Soviet Union; Egypt, and other Arab countries in the Far East and many African countries. We have broken the monopoly of Hollywood in this field.


Even from the aspect of social responsibility, our Indian films have not yet degenerated to the low level to which some of the western countries have descended. The film producer in India has not yet exploited sex and crime for the sake of profit to the extent that his American counterpart has been doing for years and years-thus creating a serious social problem for that country.


But all these assets are negated by our one overwhelming fault-that we are imitators and copyists. This one fault makes us the laughing stock of intelligent people everywhere. We make films according to borrowed, outdated formulas. We do not have the courage to strike out on our own, to get to grips with the reality of our own country, to present it convincingly and according to our own genius.


I say this not only in relation to the usual Hindi or Tamil box office films. I make this complaint against our so-called progressive and experimental films also, whether they be in Bengali, Hindi, or Malayalam. I do not lag behind anyone else in admiring the work of Satyajit Ray, Mrinal Sen, Sukhdev, Basu Bhattacharjee, or Rajinder Singh Bedi. I know they are highly and deservingly respected;but even then I cannot help saying that the winds of fashion in Italy, France, Sweden, Poland, or Czechoslovakia have an immediate effect on their work. They do break new ground, but only after someone else has broken it.


In the literary world, in which I have considerable interest, I see the same picture. Our novelists, story writers, and poets are carried away with the greatest of ease by the currents of fashion in Europe, although Europe, with the exception of the Soviet Union perhaps, is not yet even aware of Indian writing. For example, in my own province of the Punjab there is a wave of protest among young poets against the existing social order. Their poetry exhorts the people to rebel against it, to shatter it and build a better world free from corruption, injustice, and exploitation. One cannot but endorse that spirit wholeheartedly, because, without question, the present social order needs changing.


The content of this poetry is most admirable, but the form is not indigenous. It is borrowed from the west. The west has discarded meter and rhyme, so our Punjabi poet must also discard it. He must also use involved and ultra-radical imagery. The result is that the sound and fury remains only on paper, confined to small, mutually admiring literary circles. The people, the workers and the peasants who are being exhorted to revolution, cannot make head or tail of this kind of poetry. It just leaves them cold and per The content of this poetry is most admirable, but the form is not indigenous. It is borrowed from the west. The west has discarded meter and rhyme, so our Punjabi poet must also discard it. He must also use involved and ultra-radical imagery. The result is that the sound and fury remains only on paper, confined to small, mutually admiring literary circles. The people, the workers and the peasants who are being exhorted to revolution, cannot make head or tail of this kind of poetry. It just leaves them cold and perplexed. I don't think I am wrong if I say that other Indian languages too are in the grip of "new wave" poetry.


I know next to nothing about painting. I can't judge a good one from a bad one. But I have noticed that in this sphere also our painters conform to current fashions abroad. Very few have the courage to swim against the tide.

And what about the academic world? I invite you to I look into the mirror. If you laugh at Hindi films, maybe you are tempted to laugh at yourselves.


This year my own province honoured me by nominating me to the senate of Guru Nanak university. When the invitation to attend the first meeting came, I happened to be in the Punjab, wandering around in some villages near Preet Nagar-the cultural centre founded by our great writer S. Gurbakhsh Singh. During the evening's gossip I told my villager friends that I was to go to Amritsar to attend this meeting and if anyone wanted a lift in my car he was welcome. At this one of the company said, "Here among us you go about dressed in tehmat-kurta, peasant fashion; but tomorrow you will put on your suit and become Sahib Bahadur again." "Why," I said laughingly, "if you want I will go dressed just like this." "You will never dare," another one said. "Our sarpanch Sahib here removes his tehmat and puts on a pyjama whenever he has to go to the city on official work. He has to do it, otherwise, he says, he is not respected. How can yon go peasant-fashion to such a big university?" A jawan who had come home on leave for the rice sowing added, "Our sarpanch is a coward. In cities even girls go about wearing lungis these days. Why should he not be respected?"


The gossip went on, and, as if to accept their challenge, I did make my appearance in the Senate meeting in tehmat-kurta. The sensation I created was beyond my expectation. The officer-perhaps, professor-who was handing out the gowns in the vestibule could not recognize me at first. When he did he could not hide his amusement, "Mr Sahni, with the tehmat you should have worn khosas-not shoes," he said, while putting the gown over my shoulders. "I shall be careful next time," I said apologetically and moved on. But a moment later I asked myself, was it not bad manners for the professor to notice or comment on my dress? Why did I not point this out to him? T felt peeved' over my slow-wittedness.


After the meeting we went over to meet the students. Their amusement was even greater and more eloquent. Many of them could not help laughing at the fact that I was wearing shoes with a tehmat. That they were wearing chappals with trousers seemed nothing extraordinary to them.


You must wonder why I am wasting your time narrating such trivial incidents. But look at it from the point of view of the Punjabi peasant. We are all full of admiration for his contribution to the green revolution. He is the backbone of our armed forces. How must he feel when his dress or his way of life is treated as a matter of amusement?


It is well-known in the Punjab that as soon as a village lad receives college education he becomes indifferent to the village. He begins to consider himself superior and different, as if belonging to a separate world altogether. His one ambition is to somehow leave the village and run to a city. Is this not a slur on the academic world?

I agree that all places are not alike. I know perfectly well that no complex against the native dress exists in Tamil Nadu or Bengal. Anyone from a peasant to a professor can go about in a dhoti on any occasion. But I submit that the habit of borrowed and idealized thinking is present over there too. It is present everywhere, in some form or degree. Even twenty-five years after independence we are blissfully carrying on with the same system of education which was designed by Macaulay and Co. to breed clerks and mental slaves. Slaves who would be incapable of thinking independently of their British masters; slaves who would admire everything about the masters, even while hating them; slaves who would consider it an honour to be standing by the side, of the masters, to speak the language of the masters, to dress like the masters, to sing and dance like the masters; slaves, who would hate their own people and would be available .to preach the gospel of hatred among their own people. Can we then be surprised if the large majority of students in universities are losing faith in this system of education?


Let me go back to trivialities again. Ten years ago, if you asked a fashionable student in Delhi to wear a kurta with trousers he would have laughed at you. Today, by the grace of the hippies and the Hare Rama Hare Krishna cult, not only has the kurta-trousers combination become legitimate, but even the word kurta has changed to guru-shirt. The sitar became a star instrument with us only after the Americans gave a big welcome to Ravi Shankar, just as fifty years ago Tagore became Gurudev all over India only after he received the Nobel Prize from Sweden.

Can you dare to ask a college student to shave his head, moustache, and beard when the fashion is to put the barbers out of business? But if tomorrow under the influence of Yoga the students of Europe begin to shave their heads arid faces, I can assure you that you will begin to see a crop of shaven skulls all over Connaught Circus the next day. Yoga has to get a certificate from Europe before it can influence the home of its birth.


Let me give another example-a less trivial one.

I work in Hindi films, but it is an open secret that the songs and dialogues of these Hindi films are mostly written in Urdu. Eminent Urdu writers and poets-Krishan Chandar, Rajinder Singh Bedi, K. A. Abbas, Gulshan Nanda Sahir Ludhianwi, Majrooh Sultanpuri, and Kaifi Azmi are associated with this work.

Now, if a film written in Urdu can be called a Hindi film, it is logical to conclude that Hindi and Urdu are one and, the same language. But no, our British masters declared them two separate languages in their time. Therefore, even twenty-five years after independence, our government,: our universities, and our intellectuals insist on treating them as two separate and independent languages. Pakistan radio goes on ruining the beauty of this language by thrusting into it as many Persian and Arabic words as possible; and All India Radio knocks it out of all shape by pouring the entire Sanskrit dictionary into it. In this way they carry out the wish of the Master, to separate the inseparable. Can anything be more absurd than that? If the British told us that white was black, would we go on calling white black for ever and ever? My film colleague Johnny Walker remarked the other day, "They should not announce 'Ab Hindi mein samachar suniye' they should say, 'Ab Samachar mein Hindi suniye.'

I have discussed this funny situation with many Hindi and Urdu writers-the so-called progressive as well as non progressive; I have tried to convince them of the urgency to do some fresh thinking on the subject. But so far it has been like striking one's head against a stone wall. We film people call it the "ignorance of the learned." Are we wrong?

Lastly, I would like to tell you about a hunch I have, even at the risk of boring you. A hunch is something you can't help having. It just comes. Ultimately it may prove right or wrong. May be mine is wrong. But there it is. It may even prove right-who knows?

Pandit Jawaharlal Nehru has admitted in his autobiography that our freedom movement, led by the Indian National Congress, was always dominated by the propertied classes-the capitalists and landlords. It was logical, therefore, that these very classes should hold the reigns of power even after independence. Today it is obvious to everyone that in the last twenty-five years the rich have been growing 'richer' and the poor have been growing poorer. Pandit Nehru wanted to change this state of affairs, but he couldn't. I don't blame him, because he had to face very heavy odds all along. Today our Prime Minister, Indira Gandhi, pledges herself to take the country towards the goal of socialism. How far she will be successful, I can't say. Politics is not my line. For our present purposes it is enough if you agree with me that in today's India the propertied classes dominate the government as well as society.


I think you will also agree that the British used the English language with remarkable success for strengthening their imperial hold on our country.

Now, which language in your opinion would their successors, the present rulers of India, choose to strengthen their own domination? Rashtrabhasha Hindi? By heavens, no. My hunch is that their interests too are served by English and English alone. But since they have to keep up a show of patriotism they make a lot of noise about Rashtrabhasha Hindi so that the mind of the public remains diverted.


Men of property may believe in a thousand different gods, but they worship only one-the God of profit. From the point of view of profit the advantages of retaining English to the capitalist class in this period of rapid industrialization and technological revolution are obvious. But the social advantages are even greater. From that point of view English is a God sent gift to our ruling classes.


Why? For the simple reason that the English language is beyond the reach of the toiling millions of our country. In olden times Sanskrit and Persian were beyond the reach of the toiling masses. That is why the rulers of those times had given them the status of state language. Through Sanskrit and Persian the masses were made to feel ignorant, inferior, uncivilized, and unfit to rule themselves. Sanskrit and Persian helped to enslave their minds, and when the mind is enslaved bondage is eternal.


It suits our present ruling classes to preserve and maintain the social order that they have inherited from the British. They have a privileged position; but they cannot admit it openly. That is why a lot of hoo-haw is made about Hindi as the Rashtrabhasha. They know very well that this Sanskrit-laden, artificial language, deprived of all modern scientific and technical terms, is too weak and insipid to challenge the supremacy of English. It will always remain a show piece, and what is more, a convenient tool to keep the masses fighting among themselves. We film people get a regular flow of fan mail from young people studying in schools and colleges. I get my share of it and these letters reveal quite clearly what a storehouse of torture the English language is to the vast majority of Indian students. How abysmally low the levels of teaching and learning have reached! That is why, I am told preferential treatment is being given to boys and girls who come from public schools i.e. schools to which only the children of privileged classes can go.


It is not necessary for me to comment on the efforts being made to strengthen English in every sphere of life, despite assurances to the contrary. They are all too obvious. It is admitted that English is too alien and hence too difficult to learn for the average Indian. And yet, it helps the capitalists and industrialists to consolidate their position on an all-India scale. That one consideration is more important than any other. According to them whatever serves their interest automatically serves national interest too. They are hopeful that in the not too distant future the people themselves will endorse their stand-that English should retain its present status for ever.


This was my hunch and I confided it one day to a friend of mine who is a labour leader. I told him that if we are serious about doing away with capitalism and bringing in socialism, we have to help the working class to consolidate itself on an all-India scale with the same energy as the capitalist class is doing. We have to help the working class achieve a leading role in society. And that can only be done by breaking the domination of English and replacing it with a people's language.

My friend listened to me carefully and largely agreed with me. "You have analyzed the situation very well," he said, "but what is the remedy?"


"The remedy is to retain the English script and kick out the English language," I replied.

"But how?"


"A rough and ready type of Hindustani is used by the working masses all over India. They make practical use of it by discarding all academic and grammatical flourishes. In this type of Hindustani, "Larka bhi jata hei" and "Larki bhi jata hei." There is an atmosphere of rare freedom in this patois and even the intellectuals indulge in it when they want to relax. And actually this is in the best tradition of Hindustani. This is how it was born, made progress, and acquired currency all over India. In the old days it was contemptuously called Urdu-or the language of the camps or bazaars.


Today in this bazaari Hindustani the word university becomes univrasti-a much better word than vishwa vidyalaya, lantern becomes laltain, the chasis of a car becomes chesi, spanner becomes pana, i.e. anything and everything is possible. The string with which the soldier cleans his rifle is called "pullthrough" in English. In Roman Hindustani it becomes fultroo–a beautiful word. "Barn-door" is the term the Hollywood lights man uses for a particular type of two blade' cover. The Bombay film worker has changed it to bandar, an excellent transformation. This Hindustani has untold and unlimited possibilities. It can absorb the international scientific and technological vocabulary with the greatest of ease. It can take words from every source and enrich itself. One has no need to run only to the Sanskrit dictionary."


"But why the Roman script?" my friend asked.


"Because no one has any prejudice against it," I said. "It is the only script which has already gained all-India currency. In north, south, east and west, you can see shop signs and film poster in this script. We use this script for writing addresses on envelopes and post cards. The army has been using it for the last thirty years at least."


My friend, the labour leader, kept silent for some time. Then he smiled indulgently and said, "Comrade, Europe also experimented with Esperanto. A great intellectual like Bernard Shaw tried his best to popularize the Basic English. But all these schemes failed miserably, for the simple reason that languages cannot be evolved mechanically; they grow spontaneously."


I was deeply shocked. I said, "Comrade, Esperanto is just that Rashtrabhasha which the Hindi Pandits are manufacturing in their studies, from the pages of some Sanskrit dictionary. I am talking of the language which is growing all round you, through the action of the people."


But I couldn't convince him. I gave more arguments, including the one that Netaji Subhash Bose and Jawaharlal Nehru were both strong advocates of Roman Hindustani, but that too failed to convince him. The question is not whether the comrade or I was right. Perhaps, I was wrong. Perhaps, my thinking was utopian, or "mechanical"-as he called it. As I said before, you can never say whether a hunch is going to be right or wrong. But the fun lies in having it, because to have a hunch is a sign of independent thinking. The comrade should have been able to appreciate that, but he couldn't, because it was difficult for him to get out of the grooves of orthodox thinking.


No country can progress unless it becomes conscious of its being-its mind and body. It has to learn to exercise its own muscles. It has to learn to find out and solve its own problems in its own way. But whichever way I turn I find that even after twenty-five years of independence, we are like a bird which has been let out of its cage after a prolonged imprisonment-unable to know what to do with its freedom. It has wings, but is afraid to fly into the open air. It longs to remain within defined limits, as in the cage.


Individually and collectively, we resemble Walter Mitty. Our inner lives are different from our outer lives. Our thoughts and actions are poles apart. We want to change this state of affairs, but we lack the courage to do anything different from what we have been doing all along-or different from what others expect us to do.


I am sure there must be some police officers in this country who in their hearts want to be regarded as friends rather than enemies of the public. They must be aware that in England the behaviour of the police towards the public is polite and helpful. But the tradition in which they have been trained is not the one which the British set for their own country but the one which they set for their colonies. So, the policeman is helpless. According to this colonial tradition, it is his duty to strike terror into anyone who enters his office, to be as obstructive and unhelpful as possible. This is the tradition which pervades every government office, from the chaparasi to the minister.


One of our young and enterprising producers made an experimental film and approached the Government for tax exemption. The minister concerned was being sworn into office the next day. He invited the producer to attend the ceremony, after which he would meet him and discuss the matter. The producer went, impressed by the informality with which the minister had treated him. As the minister was being sworn in, promising to serve the people truly, faithfully, and honestly, his secretary started explaining to the young producer how much he would have to pay in black money to the minister and how much to the others if he wanted the tax exemption.


The producer got so shocked and angry that he wanted to put this scene in his next film. But his financiers had already suffered a loss with the first one. They told him categorically not to make an ass of himself. In any case, if he had insisted in making an ass of himself the censors would never have passed the film, because it is an unwritten law that no policeman or minister is corrupt in our country.


But there is something which strikes me as being even funnier. Those same people who scream against ministers every day cannot themselves hold a single function without some minister inaugurating it, or presiding over it, or being the chief guest. Sometimes the minister is the chief guest and a film star is the president, or else the film star is the chief guest and the minister is the president. Some big personality has to be there, because it is the age old colonial tradition.

During the last war, I spent four years in England as a Hindustani announcer at the B.B.C. During those four years of extreme crisis I never even once set my eyes on a member of the British cabinet, including Prime Minister Churchill. But since independence I have seen nothing else but ministers in India, all over the place.


When Gandhiji went to the Round Table Conference in 1930, he remarked to British journalists that the Indian people regarded the guns and bullets of their empire in the same way as their children regarded the crackers and phatakas on Diwali day. He could make that claim because he had driven the fear of the British out of Indian minds. He had taught them to ignore and boycott the British officers instead of kowtowing to them.


Similarly, if we want socialism in our country we have firstly to drive out the fear of money, position, and power from the minds of our people. Are we doing anything in that direction? In our society today who is respected most -the man with talent or the man with money? Who is admired most-the man with talent or the man with power? Can we ever hope to usher in socialism under such conditions? Before socialism can come we have to create an atmosphere in which possession of wealth and riches should invite disrespect rather than respect. We have to create an atmosphere in which the highest respect is given to labour whether it be physical or mental; to talent, to skill, to art, and to inventiveness. This requires, new thinking; and the courage to discard old ways of thinking. Are we anywhere near this revolution of the mind?


Perhaps, today we need a messiah to give us the courage to abandon our slavishness and to create values befitting the human beings of a free and independent country so that we may have the courage to link our destinies to the ones being ruled, and not the rulers-to the exploited and not to the exploiters.

A great saint of the Punjab, Guru Arjun Dev, said,

Jan ki tehl sanbhaionhah jan

Uthan bithan jan kaisanga

Jan char raj mukh mathai laagi

Aasa pooran anant taranga.


It is my earnest hope and prayer that you, graduates of Jawaharlal Nehru University may succeed where I and so many others of my generation have failed.

Tuesday, February 01, 2011

Seven questions to a Cloud computing Vendor

I'm really surprised by the hype created around Cloud computing. I just fail to understand how can any one give his data in the hand of a faceless vendor?

I've following seven questions to any one who is offering Cloud services:

1. If data is stolen - how does the Cloud vendor compensate the customer?

2. What's cost and effort involved in switching to another vendor along with my existing data?

3. What happens if vendor decides to change terms of his services at a later date; or worst, decides to close his service offering after say 1 year's notice e.g., Cisco, Microsoft as per their contract terms?

4. What remedy is there for a customer if vendor does not answer customer's service calls satisfactorily?

5. What kind of legal protection is there for a customer when data is compromised or he gets un-satisfactory service from the vendor?

6. Are cyber laws simple enough to indict the vendor and get legal remedy without spending great money, effort and time?

7. If there is a data loss due to accident, human error, bug in application,  application error, power outage, virus/malware attack, hacker attack - how will I get my data basck and in how do I compensated for the loss?

Latest news from PC World (3 Feb 2011):

"Just this week there have been two significant events that call the virtues of cloud storage into question. First, Mozy dropped its unlimited storage option--signaling an end to infinite online storage. Second, online photo service Flickr accidentally deleted a user's account--and along with it 4,000 photos and years of effort uploading, cataloging, organizing, and linking to them."

Latest news from Cisco (23 Feb 2011):
Cisco Systems has decided to kill its cloud-based e-mail service Cisco Mail, only 13 months after it was introduced, the company said. With the growing acceptance of cloud services, Cisco saw a chance to offer e-mail services along with its successful WebEx Conferencing service, which combines desktop sharing through a web browser with phone and video conferencing. But it seems customers weren't as interested in getting e-mail from the networking giant.

Friday, November 26, 2010

Status of Income Tax Refund

There is a very useful service started by Income tax department to find out status of your Income tax refund. But useful of such an important service is marred by bad data in the Income tax database. For example see following screen-shot from the website.

Notice that contradictory information is shown
Notice the text in bigger red circle. First column says "cheque has not been sent" and next column says "refund cheque is encashed".
Also, notice that refund is sent on 10-8-2006 for the Assessment Year 2007-08 i.e., Financial year ended on 31-3-2007. So, our Income tax department is so efficient and forward looking that they are able to send the refund on 10-8-2006 before year has ended on 31-3-2007!! I like this efficiency.

It clearly shows that Income tax database is in a mess. And such mess can be easily traced back to the people who enter data in to the system. So, it's a garbage in garbage out.

Recently (24-6-2010) there was a press release by Income tax that said:
“The Income Tax Department has taken the initiative to clean up the mismatched TDS data base. Many refunds are pending with the IT Department due to the mismatch of tax paid by the assessee, but the same is not being reflected in the computer software of the department.”


If you are interested in knowing reactions of citizen's of India on such public admission of failure - visit following site:
http://taxguru.in/income-tax/i-t-department-decided-to-clean-up-the-mismatched-tds-database-and-issue-income-tax-refunds.html

I am victim of above mentioned mismatched TDS database. My Income-tax return's TDS figures are no-where near to the data shown on Form AS-26 that I got from TIN website. And when I inquired Income tax department by visiting my Assessing Officer (AO) - TDS data on his computer's AS-26 for me - does not match with AS-26 that I got from the TIN website. So, I'm in a total mess because I'm trying to reconcile three different sets of TDS details viz., one that I've based on TDS certificates, second is Form 26-AS based on TIN website and third is TDS details (AS-26) that I got from AO's computer. You don't believe me? If you want proof - I'm ready to provide the same. Just write to me.

And now Income tax department has issued notices for recovery of tax. When rectification is filed u/s 154 for the correction - poor letter gets filed in AO's files. Ideally AO should do the correction in 6 months. In one of my correction dated 21-4-2003 for Assessment Year 2001-02 - no correction has been done so far and demand is still pending!! My wife has filed for correction u/s 154 on 19-5-2010 for AY 2008-09; and as on 24-11-2010 - when I appeared before her AO and inquired him if corrections were done. He said our CA should bring it to his notice by writing a letter and attaching copy of correction letter u/s 154 filed with him! In fact,  as per IT rules he was bound to have done the correction in 6 months i.e., on or before 18-11-2010!

I don't have doubt that we are living in "Incredible India."

Tuesday, November 16, 2010

Understanding IT Software Business Model in view of tax confusion

ISODA's writ petition demanding removal of Service tax on Packaged Software got dismissed by the Madras high court on 24th August 2010. The order said that government has right to levy Service tax on IT Software and is well within the rights conferred to it by the Indian Constitution. It further confirmed that software is 'goods' but transaction involving transfer of right to use - between ISODA member (software reseller) and End user could be 'sale' or 'service' depending upon what is written in the End User License Agreement  (EULA) from the software developer / copyright owner.


Tax experts concurred that interpretation of order could pose serious difficulty to the business operations of the software resellers - as would be difficult to read EULA of each Packaged Software license and determine whether the transaction is a 'sale' or 'service' or combination of the two. Doing so would be subject to the interpretation of a legal agreement - which is not within capacity of an ordinary end user or a software reseller or a field level government officer. But order did anticipate such problems and said that ISODA member could resist the tax demand when made; and could approach the court for clarification.

I feel that it is almost impossible for an average person to find out whether the transaction is a 'sale' or 'service' by merely reading the text of the EULA due to its complicated legal language and its interpretation. Due to this difficulty, it is likely that each government officer would interpret the EULA in a way convenient to his department. So, one can foresee a slow but sure build-up of numerous disputes and litigations over sale v/s service interpretation all over India.

Supreme court had opined in the TCS case that EULA is only a mechanism to enforce copyright protection i.e., restrict usage with certain terms and conditions. So, to read and interpret EULA to determine nature of transaction may not turn out to be a practical solution.

Upon doing the fine reading of the order and slight reflection, I came to conclusion that only handful of people understand business model of IT software properly. And all tax confusion is because of lack of this perspective. If one understands nature and characteristics IT software with its different modes of delivery - it is easy for any one to come to the understanding that one may not have to read EULA to determine nature of transaction between the End User and the software developer.

When we say that business of Packaged Software is an industry worth billions of dollars, there has to be a common thread that makes it as one big industry. Currently there is an urgent need to identify such commonality of characteristics and quickly establish nature of IT software transactions. For example, it is established by courts well that sale of Electricity is 'goods', providing Telephony services is a 'service', sale of mobile SIM cards is a 'service' for first transaction and 'goods' subsequently. It is simply not practical to keep reading and interpreting EULA of each packaged product. But, million dollar question is who will do this for the IT software industry in India?

So, I set out to put down basic ground realities of IT software business on a piece of paper for the sake of better understanding. In the piece below I have tried to draw the picture and you may decide - if it adds to your understanding of the nature of software transactions.

Information Technology Software vis-a-vis other types of software
Electronics has brought revolution to the modern world beyond what a men could have ever imagined just 150 years back. Over last 40 years a new branch of Electronics emerged with general purpose or programmable electronic devices called Computers and Programmable Logic Controllers (PLCs). Computers were found useful in business and PLCs were found useful in Industries for automation. This general purpose Computers and its network became very popular and started being used widely all over the world. This branch of Electronics popularly came to be known as Information Technology. While PLCs and other special purpose Electronic items also progressed at a fast pace. But among them except for Smart Mobile Phones most of the electronic items remained an item performing one specific function for which it was designed.

So, Information Technology (IT) is a branch of Electronics with attendant Hardware device, Software and network of such devices using Telecommunication Networks. Other programmable electronic items are known as PLCs, CNC machines, Industrial Robots etc.; and special purpose electronic items like Television sets, Audio-Video Players and Recorders, Digital Cameras, Telephone Instruments including Mobile phones, Automobile electronics, Rail Electronics, Satellite Electronics, Home gadget Electronics for Washing Machines, Microwave Ovens, Cooking Stoves etc. All of these electronic devices are run by great piece of software inside it but it's not IT software. In fact, TV programs recorded in studios for telecast on TV channels is called TV software! And we are not talking about it either, here.

Technical Nitti-gritty
Each of this electronic item is made up of two parts - popularly known as hardware and software. Software is of two type - embedded and programmable. Generally speaking, embedded software is hard-coded i.e., non-changeable software and is integral and essential part for working of the electronic device; it is considered part and parcel of hardware. While programmable software is modifiable and replaceable in nature - although non-essential many a times - but could make important contribution to the usefulness of the electronic device. So, when IT software is referred to - we are referring to programmable software used by computers or network of computers.

Such IT software is developed by a Software Developer using certain type of software called Development tools which include various type of Software languages like C, Java, Cobol, Pascal, Assembly, Fortran etc. and development tools like Visual Studio, Eclipse; and Databases like Oracle, DB2, Informix, Sybase etc.

IT Software developer would develop a software using above mentioned development tools for a specific client based on his specific requirement - called Customized Software; or develop a general purpose software - designed and developed keeping in mind needs of many users having similar requirement - called Packaged Software.

Packaged Software Business
Development of Packaged software is a business with great risks and great rewards. Few outstanding examples of this business model are Microsoft, Symantec, Adobe, McAfee, Autodesk etc. Software development, Manufacturing and Distribution of Packaged software is internationally a big business running in to billions of Dollars. In India, this business size is estimated to be Rs.10,000 crore a year.

Diagram below depicts the licensing and distribution model of Packaged IT Software.

IT Software Licensing and Distribution Model
First and foremost point to be noted to understand this business model is that packaged software is licensed to the end user by an End User License Agreement. It is an agreement between Software Developer (or Vendor - who is also a copyright owner, say Microsoft) - who is also a copyright owner and End User (say Coal India Ltd or Sachin Tendulkar).

Vendor provides his packaged software in the market to various types of customers like Replicators & Distribution companies, End users including companies/organizations,  hardware vendors on OEM basis and other independent software vendors/developers - by packaging it differently through various license agreements. And Vendor receives money for the same from various customers depending upon terms of the  license agreements.

Typically it's a two tier model - where an intermediate company is given license to replicate and distribute. It is essentially a license to do the "production" or "manufacturing"; and the resulting product is sold or distributed in the market to reach the end user via a traditional distribution channel or via eCommerce transaction.

Packaged Software delivered in many different forms
One important point to be noted here is that packaged software is delivered to end user in various forms of delivery viz., Media (CD/DVD/Storage device), Internet Download, Network Delivery, Backup Media/Storage Device etc. How packaged software is delivered to the end user does not matter or alter the nature of transaction. Even one of the explanatory notes released by Tax Research Unit said following:
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D.O. F. No.334/1/2008-TRU Date: 29-2-2008
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4.1.5 Software and upgrades of software are also supplied electronically, known as digital delivery. Taxation is to be neutral and should not depend on forms of delivery. Such supply of IT software electronically shall be covered within the scope of the proposed service.
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On this point of forms of delivery there has been lot of confusion in the mind of various people - so this point requires careful consideration while deciding on nature of transaction.

Resell of Packaged Services
In the above diagram, one more point to be noted is that in this model - "Subscription License" which involves some kind of service for 1 or 2 year period - is productized (or packaged - in other words). So here, a service (if any) is packaged and sold, resold and distributed like a product. It is important to recognize this unique distribution model of "service" - as its improper understanding may pose some difficulty with respect to taxation issues. I would like to call it as a "resell of a service".

So, in the context of IT software - government should recognize and accept that "resell and distribution of service" should be treated as trading transaction i.e., "sale" - as there is no element of "service" provided by the reseller. Also, the transaction should not be subjected to TDS (Tax Deducted at Source) because its only a "sale" or "trading" transaction. In all these transactions, actual service provider is the software developer and actual service recipient is end user. And reseller is only facilitating the transaction by trading/sale of a productized service.

Given below is the tabular depiction of the Business and Distribution Model of IT Software.

Business and Distribution Model of IT Software
I know, above diagram is difficult at first glance; and would interest you only if you are really interested in understanding business and distribution model of IT software. Any way, give it a try.
 
Current taxation structure for ISODA members is depicted below:
Various Taxes on IT Software distribution in India

So, say when Sachin Tendulkar buys say Microsoft Office 2010 Home and Business Edition box pack with DVD by paying say Rs.10,000/- from a store he get a copy of software developed by Microsoft Corporation,USA, manufactured by Microsoft Operations Pte Ltd, Singapore (MO) and sold to Croma through an Indian distributor like Ingram Micro India Ltd (IMIL) via Microsoft Regional Sales Corporation, Singapore (MRSC). So, distribution path is MC --> MO --> MRSC --> IMIL --> Croma --> Sachin Tendulkar.

Similarly when Coal India Ltd (CIL) purchases say 10 licenses of Microsoft Office 2010 Std by paying Rs.15,000/- per license - they get a piece of paper authorising them to use Microsoft Office 2010 Std on 10 PCs. CIL can install the software on 10 PCs from a media pack (DVD) purchased from the reseller at Rs.1,500/- per piece - which could be one time purchase. For the sake of simplicity - we shall assume that CIL had this media pack from its earlier purchase. Note that this paper license also follows same distribution route as shrink wrap box purchased by Sachin Tendulkar.

But Sachin Tendulkar pays VAT @5% on Rs.10,000/- i.e., Rs.10,500/-; and CIL pays Service Tax @10% on Rs.1,50,000/- i.e., cost of paper license; and VAT at 5% on the total viz., 1,65,000/-, taking total payment to Rs.1,73,000/- (rounded off). And while making payment to the reseller - CIL deducts TDS at 10% and pays the balance amount viz., 1,55,700/- to the reseller.

Assuming reseller's purchase price of each Microsoft Office 2010 Std to be Rs.14,000/-; he would had paid (Rs.14,000/- x 10 no.s + 10% Service tax) x 5% VAT = Rs.1,61,700/- to the distributor IMIL. Of course, he would also deduct 10% TDS and pay only balance to the distributor. But he will have to deposit TDS amount with Income tax immediately. So, while reseller made a profit of Rs.10,000/- in books of accounts; he lost Rs.6,000/- from his cash flow. So, net effect of Service tax and TDS on reseller is that reseller keeps on depositing more than 60% of his gross margin to Income tax department.

As far as reseller is concerned he just takes an order from CIL at Rs.15,000/- per license, places it on IMIL at Rs.14,000/- per license, who in turn purchases it from MRSC at say USD 290/- (Rs.45/USD= Rs.13,000/-) per license. And MRSC procures it from MO at say USD 260/- per license. And MO pays say USD 200/- per license as royalty to Microsoft under its replication and distribution agreement.

Summary and Recommendation
So, following points are very clear from the business model described above:
1. Once Packaged software is manufactured by the replication and distribution licensee it assumes nature of a product i.e., goods.
2. In the hand of distributor and reseller the product is sold as it is - without any service addition from his side. So, there is no element of service provided by the distributor or a reseller to the end user. So, it may not be correct to levy 10% service tax on a packaged software product from the reseller/distributor.
3. Since distributor / reseller is not providing any service to the customer, it may not be correct to deduct 10% TDS on his payment.

I hope careful reading of above three diagrams will clear most of the misunderstanding that is prevalent among Government Officials, Judiciary and Politicians; and help them to devise, design and interpret IT Software taxation structure in proper context with reasonable clarity.

In summary, it is easy to understand for any one that transaction related to a Packaged IT Software is essentially a sale / trading activity as far as software reseller is concerned. So, sale and distribution of Packaged IT Software should be treated as trading i.e., sale/purchase of goods/services and should be liable to taxes under Excise/Customs duty, VAT and as Business Income under Income tax.

Bringing supply of Packaged IT Software products under Service tax / Royalty regime has brought unnecessary complexities to the sun-rise industry. If government decides to continue taxing this industry with complex taxation laws, Packaged Software industry will die a slow but certain death. It's time we all wake up and take corrective action.

Covid Resource for Second Wave

Initial part of this blog has resources useful for all of India. Later part is dedicated to resources for Mumbai city.