SCOPE OF SERVICES UNDER MANAGEMENT MAINTENANCE OR REPAIR SERVICE

[Dr. Sanjiv Agarwal]

Meaning

The taxable service of ‘management, maintenance or repair service’ stood as under during different relevant periods.

W.e.f.. 01.07.2003     

             ‘maintenance or repair’ means any service provided by ––

(i)         any person under a maintenance contract or agreement; or

(ii)        a manufacturer or any person authorized by him,

in relation to maintenance or repair or servicing of any goods or equipment, excluding motor vehicle;”           

W.e.f. 16.06.2005

“management, maintenance or repair” means any service provided by 

(i)         any person under a contract or an agreement; or

(ii)        a manufacturer or any person authorized by him,

                                   in relation to, —

(a)        maintenance or repair including reconditioning or restoration, or servicing of any goods or equipment, excluding motor vehicle; or

(b)        maintenance or management of immovable property;”

       

W.e.f. 01.05.2006

”management, maintenance or repair” means any service provided by 

(i)         any person under a contract or an agreement; or

(ii)        a manufacturer or any person authorised by him,

                                   in relation to, —

(a)        management of properties, whether immovable or not;

(b)        maintenance or repair of properties, whether immovable or not; or

(c)        maintenance or repair including reconditioning or restoration, or servicing of any goods, excluding a motor vehicle

W.e.f. 16.05.2008

 “management, maintenance or repair” means any service provided by -

(i)         any person under a contract or an agreement; or

(ii)        a manufacturer or any person authorised by him,

                        in relation to, —

(a)        management of properties, whether immovable or not;

(b)        maintenance or repair of properties, whether immovable or not; or

(c)        maintenance or repair including reconditioning or restoration, or servicing of any goods, excluding a motor vehicle;]

Explanation. — For the removal of doubts, it is hereby declared that for the purposes of this clause, —

(a) “goods” includes computer software;

(b) “properties” includes information technology software

Taxable Service

According to section 65(105)(zzg) “taxable service means any service provided to a customer, by any person in relation to management, maintenance or repair”.

Further, it is to  be noted that the words repair and maintenance are sometimes used interchangeably. Since the definition of these terms have not been provided for in the Act, the scope of both the terminologies has to be determined as per their dictionary meanings:.

Black’s Law Dictionary defines ‘maintain’, ‘repair’, as under:

Maintain                                                                          

“ to car for (property) for purpose of operation productivity or appearance; to engage in general repair and upkeep”                    

Repair

A contractual clause providing that a product’s defect will be remedied by repairing or replacing the defective part or product

Alteration A substantial change to real estate, esp. to a structure, usu. not involving an addition to or removal of the exterior dimensions of a building’s structural parts. Although any addition to or improvement of real estate is by its very nature an alteration, real estate lawyers habitually use alteration in reference to a lesser change. Still, to constitute an alteration, the change must be substantial- not simply a trifling modification.

Wharton’s Law Lexicon, Fifteenth Edition-

Maintain, with its grammatical variations and cognate expressions, includes, includes the fencing, covering in, repairing, restoring and cleansing of a protected monument, and the doing of any act which may be necessary for the purpose of preserving a protected monument or of securing convenient access thereto [Ancient Monuments and Archaeological Sites and Remains Act, 1958]

Repair may include replacement or even a renewal. All replacement or renewals need not necessarily be repairs covenant for repairs making lessee liable to execute all repairs except major repairs, tenant undertook substantial repairs, Sir Shadi Lal and Sons vs. Commissioner of Income Tax, AIR 1988 SC 42 ………

Repair, indicates the restoration to a good and sound condition of a structure which has been decayed or damages, Jiya Lal vs. State of Uttar Pradesh, AIR 1981 All 72.

             P Ramanatha Aiyar’s The Law Lexicon, 1997 Edition

‘Maintenance’ extends to the keeping of something in proper order before it falls out of condition, and does not exclude improvements or a degree of substitution. If the building after the work is done is something substantially different in character from that which it was before, it cannot be described as maintenance or repair. Act Construction v. Customs and Excise, (1979) 2 All ER 691, 695 (QBD). [Finance Act, 1972]

 ‘Maintenance’ means not only keeping in good repair but also keeping in efficient working Order or in an efficient state. O’neill v. Brown (1961) 1 All ER 571, 573 (QBD)

Repair.            1. Restoration of some material thing or structure by the renewal of decayed or worn out parts, by refixing what has become loose or detached[S. 108(f), T.P. Act]; 2. to restore by replacing a part or putting together what is torn or broken.

“Repairs” defined. Act 2, 1902 S. 2(1)(g).

“Repair” means to mend, add to, or make over; restoration in a sound or good state after decay, waste, injury, or partial destruction. See 38 Bom LR 280.

Repair generally means, to make good defects; it would include renewal where that is necessary. (Inglis v. Buttery, 3 App. Ca. 552)

“Maintenance and “Repair” when applied to a street practically mean one and the same thing. Top repair means to restore to a sound or good state after decay, injury, dilapidation, or partial destruction. The word “maintain” does not mean to provide or construct, but means to keep up, to keep from change to preserve.

Repairs and Improvements. All repairs are improvements, though all improvements are not repairs. Mohammad Moideen Rowther v. N.N.H.  Mohammad Moideen Rowther, AIR 1960 Mad, 24, 27

Repair and Re-erection. The expression ‘repair’ signifies restoration to the original condition. Anything which substantially improves or materially alters a thing from its condition cannot be said to be merely a repair of that thing. Hansraj Tirathram v. Jammu Municipality, AIR 1963 J&K 18,19.

Repairs and Renovation. Renovation means demolition of old structure and building a new one on the same site. Repair whenever a thing or a part of a thing is worn out and a new thing is replaced in its place, such replacement of a new thing amounts to repair. Khimchand Parshottam v. Shah Bhupatray Nathalal and Others, AIR 1971 Guj 81, 83. Saurashtra Rent Control Act (22 of 1951), Sec 13(1) and 16.

           Restoration means to restore

An obligation to “restore” a road interfered with under compulsory powers, is to make it as nearly as possible identical with the road before the interference. (R. v.Birmingham&GloucesterRy, 2. QB47:10LJQB322). To give back; to make return or restitution of (anything previously taken away or lost); to put back into a former or original state [S.108(m), T.P. Act (4 of 1882]; [S.64, Indian Contract Act(9 of 1872].

Restoration of property may be made by any one whether the person taking it or not.

            What is taxable under management, maintenance or repair in relation to property is only maintenance or repair, not reconditioning restoration or servicing.

While in case of properties, reconditioning or restoration or servicing is excluded, in case of goods, such services will be covered. In case of goods, services in relation to management will not be covered. Goods will include software also. Following services are thus, taxable services —

       Property                                             Goods

— Management                                  — Maintenance

— Maintenance                                   — Repairs

— Repairs                                           — Reconditioning

— Restoration

— Servicing

Further, by any stretch of imagination, property can not be considered as a ‘good’ as ‘good’ has already been defined in section 65(50) of Finance Act, 1944 to mean as defined in section 2(7)of the sale of Goods Act, 1930. Thus, Goods, therefore, mean or include —

(i) all kinds of moveable articles and properties,

(ii) stocks and shares,

(iii) growing crops, grass and other agricultural produce, and

(iv) things attached to or forming part of land which can be bought or sold,

(v) software packed in media.

but would exclude –

(i) money,

(ii) actionable claims, and

(iii) immovable property

Thus, restoration of immovable properties is not covered for the purpose of Service Tax under section 65(105) (zzg).

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