TaxTMI 
TaxTMI 
2015 (11) TMI 328
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....ssment proceedings were initiated by the assessing authority noticing that there was under-assessment in the order concluded on 23.11.2006 and, therefore, passed the re-assessment order on 27.2.2008. The assessee preferred a Writ Petition in W.P.No. 5028/2008 before this Court challenging the re-assessment order. By an order dated 27.3.2008 the Writ Petition was partly allowed by setting aside the re-assessment order and remitting the matter to the assessing authority for fresh disposal after providing a reasonable opportunity of being heard to the assessee. After such remand, the assessing authority concluded reassessment proceedings by his order dated 25.8.2008 levying tax on activities of business consultancy services and the enterprises resource planning software. Challenging the said order, the assessee preferred an appeal before the first appellate authority who confirmed the order of the assessing authority by its order dated 5.3.2009. Challenging the said order, the assessee preferred a second appeal before the Karnataka Appellate Tribunal in STA No. 943/2009. The Tribunal has passed the impugned order on 9.12.2010 setting aside the order passed by the assessing authority a....
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....re and sells the software to the assessee's customers. Thereafter ERP implementation team of the assessee enters into contracts with the customers for ERP implementation services if the customers seek such implementation. The ERP implementation service is independent of the earlier business consultancy service. Every customer does not contract for both the BCS and ERP implementation service together. When ERP software is purchased by the client such software needs to be installed, integrated and implemented at the client's end. The installation of ERP software is performed by the project implementation team comprising of the personnel of the assessee company, along with the employees of the client. The members of the ERP software implementation team of the assessee play various roles in the ERP software implementation process depending on their skills. The team with the skill ensures that the ERP software is appropriately integrated in the system of the client, and thereafter implementation of the said software is done. In this implementation process the experts team of the assessee will take all necessary steps to provide functional data for the installation of the ERP sof....
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....ient. As the ownership of these deliverables vest with the client, in order to see that he does not prevent them from using that knowledge while attending to other clients, these clauses 2.2, 2.21 are entered into. Otherwise, there was no necessity to introduce those clauses. He further submits that the entire consideration received for providing services to the client have been subjected to service tax as is clear from the judgment of the CESTAT in the assessee's case which is reported in 2010 (17) STR 317 which is affirmed by the Apex Court while dismissing the appeal at the stage of admission itself. Therefore, no portion of the consideration received could be attributed to sale of the software and, therefore, he submits the impugned order does not call for any interference. 9. In so far as the argument that they have admitted by their letter 25% represents the sale is concerned, he submits when they were called upon to state what portion of the said consideration relates to the contract in ERP implementation they have answered by saying '25%'. It is not a payment which represents the sale price. The Tribunal on consideration of the entire material on record has r....
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....ified professionals to enable the general software to be converted into a specific software designed to serve the needs of the particular customer. ERP implementation specialists do nothing more than fill up those gaps in a branded standard software. The writing up of a code and insertion thereof in the existing gaps in the branded software is all that is done by the assessee's employees in the course of implementation of ERP software. The job description exists of what the assessee is required to do with the software already purchased by the concerned customer. User rights over that software vest in the customer. The codes which the assessee's professionals insert in that software are not proprietary codes having a marketability of their own which the concerned customer can possess or transfer or sell. The moment such machine readable instructions are incorporated in the codes in the standard ERP software purchased by the concerned customer, the concerned customer acquires full rights over the use of those codes. It is not as if the assessee has put those codes on a Disc or Tape or any other media and kept that media itself for sale which the concerned customer may purchas....
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....e developer of the software. Therefore, in both packaged and customized software, where copyright is held by the developer of software and the copyrighted article alone is handed over to the customer as a transfer of right to use goods, the software is goods and liable to VAT alone. 25. However, in the case of customized software, it is possible for an entity to work on a hired contract basis rendering pure service and get delivered fully developed software for a specified customer with future contracts for upgradation and enhancement. In such a situation too, the software emerges. However, the copyright in such software belongs to the customer, as it is developed, and the developer of the software does not retain any copyright in such software. In such a situation, since there is no transfer of property in goods and what is provided is only a pure service, there can be no liability to VAT. The consideration in such cases is liable only to service tax. 26. In the case of Annual Technical Support (ATS), if the agreement of the contract includes the annual maintenance involving both service and issuing upgraded or enhanced software, then such a contract is a combina....