Software consultancy receipts taxable as goods-related turnover when the real transaction is software development and transfer to customers.

Software consultancy receipts for programming and developing computer software were held taxable under Entry 22 of the Sixth Schedule to the Karnataka Sales Tax Act, 1957. The court treated the real nature of the transaction as development and supply of application software for customers, and relied on the factual findings that the amounts described as consultancy or professional charges were received for that work. Applying the principle in Tata Consultancy Services, software transferred on media or otherwise can constitute goods, and the transfer of property in such software may attract sales tax under the works-contract and goods-related turnover provisions. The question was answered in favour of the Revenue and against the assessee.

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Issues: Whether software consultancy charges received for programming and developing computer software were taxable under Entry 22 of the Sixth Schedule to the Karnataka Sales Tax Act, 1957.

Analysis: Section 5B of the Karnataka Sales Tax Act, 1957 levies tax on the taxable turnover of transfer of property in goods involved in execution of works contracts, and Entry 22 of the Sixth Schedule specifically covers programming and providing computer software. The transaction records showed that the amounts described as consultancy or professional charges were received for software programming and development, and the revisional authority's factual findings established that the work undertaken was development of application software for customers. In light of the principle declared in Tata Consultancy Services, software put on media and marketed or transferred constitutes goods, and the activity of developing and supplying software can attract sales tax where property in goods is transferred.

Conclusion: The software consultancy charges were taxable under Entry 22 of the Sixth Schedule to the Karnataka Sales Tax Act, 1957, and the question was answered in favour of the Revenue and against the assessee.

Final Conclusion: The appeal failed because the receipts for software programming and development were held to be taxable under the Karnataka sales tax regime applicable to transfer of property in goods involved in software development.

Ratio Decidendi: Where the real nature of the transaction is programming and development of software for a customer, and the software is transferred on media or otherwise as part of the transaction, the receipts are taxable as goods-related turnover under the applicable sales tax provision.

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