Partners Support India VAR Accused Of Tax Evasion On Software Imports

Following the recent searches at Softcell Technologies by the Directorate of Revenue Intelligence (DRI) of India and the subsequent arrest of Sunil Dalal, the managing director of the company, on charges of duty evasion on software imports, several Softcell partners are expressing support for Softcell.

"Softcell is known to be an ethical and a process-driven company," said Sudhir Kothari, managing director of Embee Software. "The incident is unfortunate and shouldn't have happened. It is time for the industry to show solidarity and support for Sunil and his company. Even the software vendors need to stand up and support one of their leading partners."

Softcell has been accused of evading import duties on software imports. The DRI has alleged that Softcell Technologies imported software from Microsoft in Singapore on CDs and DVDs, but paid duty only on the CD component, which is usually 5 percent of the value of software. The company separately billed software paper licenses declaring them as documents, which in fact forms 95 percent of the transaction value of software imported. Import of documents don't attract any duty.

Softcell has denied any illegality and its partners are supporting the company. "This is not a case of duty evasion, but a difference in interpretation of the law. This process is followed by all software importers. Softcell is being made a scapegoat; there are bigger players that follow the same practice for importing software," said Sudarsan Ranganathan, CEO of Veeras Infotek.

"As a sign of solidarity, the entire channel fraternity should stop importing and selling software products till there is absolute clarity about taxation on software," Kothari said. "Vendors need to take the lead in the matter."

Sudarsan said laws addressing the issue should be made clearer. "It's now up to the software vendors to demonstrate that they really care for their partners," he said. "It's up to Microsoft to take the matter up with the highest government authorities to resolve it."

Harinder Salwan, CEO of Tricom International and Secretary of the newly-formed software association ISODA, also offered support. "Dalal's arrest is very unfortunate," he said. "The confusion over tax levies on software has existed for long and yet neither the government nor the vendors have done enough to get clarity. It is important that the laws are made clear leaving no confusion."