Service tax applicability

Dear All,

I would like to know the applicability of service tax to the following transaction.

We are a startup software company in Karnataka and we completed our 1st client's work last month. For which, we received the payment in 1st week of Dec'11. Lets assume we raised invoice with the value of INR40000 + (Service tax 10.3%) 4120 = Total 44120. Our client deducted 10% TDS on the total value, that is, 4412 and paid remaining amount of 39708. Now we would like to know whether we need to pay service tax INR 4120 OR 10.3% of 39708 (i.e. 4090).

Thanks in advance,

Prasad