TaxTMI 
TaxTMI 
2005 (12) TMI 536
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....ired for machinery of the said company. Petitioner-company has also agreed to depute suitable personnel to MCP factory at Hyderabad for supervising uninterrupted production of CCC. Petitioner-company is entitled for 5 per cent of the sales turnover of CCC towards remuneration for the services rendered. An agreement to that effect was executed on April 15, 1999 between the petitioner-company and Mas Combustible Pack Ltd. Pursuant to the agreement petitioner-company had deputed its personnels to the Hyderabad factory of Mas Combustible Pack Ltd., for providing technical know-how and also for maintenance and repairs of the machinery of that company and in consideration the petitioner-company has received a sum of Rs. 1,24,19,567 for the assessment year 1999-2000 as royalty. 3.. The Sales Tax Officer, Cherthala, the assessing authority, verified the books of account of the petitioner for the year 1999-2000 for completing the assessment. On verification of the accounts it was found that the petitioner had received a sum of Rs. 1,24,19,567 towards royalty for assessment year 1999-2000 and hence a notice under section 17(3) of the Kerala General Sales Tax Act, 1963 was issued to the peti....
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....ot constitute "goods" for the purpose of levy of sales tax and therefore not exigible to sales tax. Tribunal rejected that contention and held that the amount of royalty received can be subjected to tax. Regarding the addition of Rs. 1 lakh made to the conceded turnover with corresponding addition of Rs. 70,000 under section 5A of the Act, the Tribunal found that the said addition was justified because non-maintenance of manufacturing account is a ground to sustain the addition and therefore the deletion of the same by the first appellate authority was held to be not in order. Consequently, addition made by the assessing authority was restored. Points raised in other revision petitions are also the same. 6.. Four questions of law were formulated by the petitioner which we re-draft and consolidate and state as follows: (i) Is the Tribunal justified in law in holding that the technical know-how be considered as goods unless it is copied or incorporated into any media and then transferred? (ii) Whether the Tribunal is justified in rejecting the accounts and restoring turnover estimation made by the assessing authority, though the only purchaser of the commodity was the Government ....
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....echnical support to be provided to the party of the second part as per this agreement." Counsel for the revision petitioner placing reliance on the above mentioned agreement submitted that there was no transfer of technical know-how to Mas Combustible Pack Ltd., for manufacture of CCC. But the agreement was for offering the technology required for the production of CCC and to help continuously by providing the required technical details for undertaking repairs and maintenance required to the machinery by deputing suitable personnel so as to have uninterrupted production. 8.. The agreement in our view speaks for itself. Petitioner has transferred the technical know-how to another company, i.e., M/s. Combustible Pack Ltd., for consideration. M/s. Combustible Pack Ltd. have expressed their willingness to purchase the technology for production of CCC from the petitioner-company. For transfer of technical know-how petitioner received Rs. 1,24,19,567 for the year 19992000, Rs. 56,59,506 for the year 2000-01 and Rs. 13,36,896 for the year 2001-02. Intention of the parties is clearly reflected in the agreement. One party has expressed its willingness to purchase technology required for t....
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....t per cent at all points of such transfer; (iv)(a) in the case of transfer of goods involved in the execution of works contract where transfer is in the form of goods at the rates and at the points specified against such goods in the First, Second or Fifth Schedule; (b) in the case of transfer of goods involved in the execution of works contract (where the transfer is not in the form of goods but in some other form) specified in the Fourth Schedule, at the rate specified against such contract in the said Schedule: Provided that no tax is payable in respect of the turnover of goods the transfer of which was effected without any processing or manufacture on which tax was levied under clause (i) on any earlier sale in the State or which are exempted from tax and for goods coming under the Fifth Schedule, no tax specified for the first sale is payable, on which tax was levied in any earlier sale in the State: Provided further that tax payable in respect of turnover of goods coming under the Second Schedule the transfer of which was effected without any processing or manufacture shall not exceed the rate and only at the points specified against such goods in the said Schedule. (v) ....
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....nsferred, delivered, stored or possessed, etc., are "goods" for the purposes of sales tax. Technical know-how can also be transmitted, transferred, delivered, stored or possessed, etc. Agreement would definitely indicate that there is a transfer of technology for the manufacture of CCC deputing personnel for consideration, i.e., through human media. Transfer of technology in any manner either through floppy disc, CD or through deputing personnel, etc., would constitute sale within the meaning of section 2(xxi) of the Kerala General Sales Tax Act. 9.. We may in this connection refer to the judgment of the Supreme Court in Associated Cement Companies Ltd. v. Commissioner of Customs [2001] 124 STC 59. Court held as follows: "It is true that what the appellants had wanted was technical advice or information technology. Payment was to be made for this intangible asset. But the moment the information or advice is put on a media, whether paper or diskettes or any other thing, then what is supplied becomes chattel. It is in respect of the drawings, designs, etc., which are received that payment is made to the foreign collaborators. It is these papers or diskettes, etc., containing the te....
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....2001] 124 STC 59 (SC); (2001) 4 SCC 593. A software programme may consist of various commands which enable the computer to perform a designated task. The copyright in that programme may remain with the originator of the programme. But the moment copies are made and marketed, it becomes goods, which are susceptible to sales tax. Even intellectual property, once it is put on to a media, whether it be in the form of books or canvas (in case of painting) or computer discs or cassettes, and marketed would become 'goods'. We see no difference between a sale of a software programme on a CD/floppy disc from a sale of music on a cassette/ CD or a sale of a film on a video cassette/CD. In all such cases, the intellectual property has been incorporated on a media for purposes of transfer. Sale is not just of the media which by itself has very little value. The software and the media cannot be split up. What the buyer purchases and pays for is not the disc or the CD. As in the case of paintings or books or music or films the buyer is purchasing the intellectual property and not the media, i.e., the paper or cassette or disc or CD. Thus a transaction sale of computer software is clearly....