SEPT 27: According to a notification issued by the Central Board of Direct Taxes (CBDT) on Wednesday, the meaning of `computer software' under Sections 10A and 10B of the Income Tax Act has been enlarged to include IT-enabled services. An identical definition has been provided in Section 80 HHE of the Act.The products and services, which will attract tax concessions, include back-office operations; call centres; content development/animation; data processing; engineering and design; geographic information system services; human resource services; insurance claim processing; legal databases; medical transcription; pay roll; remote maintenance; revenue accounting; support centres and web-site services.Although the industry has urged the finance ministry to provide tax concession to all the IT-enabled services, CBDT has included a limited number of services in the expanded definition of `computer software'.The official pressnote said that, as "it is not possible to provide a comprehensive list for a sector which is still evolving," only a limited number of services are being granted the benefit of tax concession.It may be mentioned that 10A and 10B of the Income Tax Act provide for deduction of profits and gains derived by an undertaking set up in software technology parks, export processing zones, export-oriented units, free trade zones and special economic zones. The deduction is available for a period of 10 consecutive assessment years in a graded manner. An undertaking set up on or before March 31, 2000 will be entitled to a deduction for a period of 10 years.Similarly, under Section 80 HHE of the Income Tax Act, profits earned by any unit set up anywhere exporting computer software and specified IT services will be exempted from taxes subject to 20 per cent phasing out introduced in the last budget.The issue of granting tax concession to IT-enabled products and services was taken up by the information technology minister Pramod Mahajan with the finance ministry.Tax concession granted to the IT-enabled services are aimed at giving a boost to software export which has picked up significantly during the last few years.
