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TaxTMI 
TaxTMI 
TaxTMI 
2020 (8) TMI 346
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....uded in the sales turnover, which the assessee failed to do. The assessee took the contention that the software was sold for a particular price and the consultancy services are with respect to the modifications made in the software to adapt it to the purchaser's requirements. Such adaptation made in the software involved only labour of IT professionals and there is no sale of goods. The AMC also is with respect to the repair, maintenance or modifications made in the software after the sale, which again involves only labour and no transfer of property in goods. The work carried on in the software sold to the purchaser is customization as per the requirement of the purchaser. 2. The Intelligence Officer found that the price quoted as also the agreement executed is a composite one for the software and the customization carried out. The dominant object was the sale of the software with the customization incorporated in the Compact Disc (CD), which contains the software. Only a meagre amount was conceded as price of software and the lion's share was shown as consultancy charges, thus disclosing a willful intention to evade tax. Penalty was imposed at double the tax sought to be....
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....ftware as such may not satisfy the requirements of the individual purchasers. It requires a customization, which can be done only with reference to the requirements of a client. What is sold is only the software in a CD and the customization is one as per the requirements of the client after the sale, for which consultancy charges are received. The consultancy charges do not involve any transfer of property in goods and, hence, there could be no sales tax charged on the same. The assessee has been paying service tax on the consultancy charges, is the specific contention taken. The learned Counsel for the assessee relies on the decision in Imagic Creative Pvt. Ltd. v. Commissioner of Commercial Taxes & Others [(2008) 12 VST 371 (SC)] as also a Division Bench decision of this Court in State of Kerala v. Techsmith Software (P) Ltd. [2016 (3) KLT 260]. 6. We do not think that the clarification referred to by the Intelligence Officer is in any manner applicable to the facts of this case. The clarification referred to is insofar as the consultancy charges paid by the Kerala State Construction Corporation Limited. Obviously the clarification is issued in the context of a works contract. ....
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....ustoms Act which defines the word "goods", including clause (c) "baggage" and clause (e) "any other kind of moveable property", it was held that any moveable article brought into India by a passenger as part of his baggage can make him liable to pay customs duty as per the Customs Tariff Act. Any media whether in the form of books or computer disks or cassettes which contain information technology or ideas would necessarily be regarded as goods under the aforesaid provisions of the Customs Act, these items being moveable goods, covered by Section 2(22)(e) of the Customs Act. What was transferred was technical advice on information technology. But the moment the information or advice is put on a media, whether paper or diskettes or any other thing, the supply is of a chattel. It is in respect of the drawings, designs, etc. which are received that payment is made to the foreign collaborators. The question whether the papers or diskettes etc. containing advice and/or information are goods for the purpose of the Customs Act was answered in the affirmative. Their Lordships clearly held that "intellectual property when put on a media would be regarded as an article on the total value of ....
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.... purpose of Section 14 is to find out the value of the goods which are being imported. The EGL in this case was purchasing a Midrex Reduction Plant in order to produce sponge iron. In order to produce sponge iron, it was essential to have technical know-how from Midrex. It was also essential to have an operating licence from them. Without these, the plant would be of no value. That is why the precondition of a process licence of Midrex was placed in the agreement with TIL. It will not be proper to view that agreement with TIL in isolation in this case. The plant would be of no value if it could not be made functional. EGL wanted to buy the plant in a working condition. This could only be achieved by paying not only the price of the plant, but also the fees for the licence and the technical know-how for making the plant operational. Therefore, the value of the plant will comprise not only the price paid for the plant but also the price payable for the operation licence and the technical know-how. Rule 9 should be construed bearing this in mind". {underlining by us for emphasis} 9. The contention of the respondent that the requirement for obtaining process licence fee before the s....
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....t Companies Ltd was heavily relied on. It was held so in paragraphs 27: "27. In our view, the term "goods" as used in Article 366(12) of the Constitution and as defined under the said Act is very wide and includes all types of movable properties, whether those properties be tangible or intangible. We are in complete agreement with the observations made by this Court in Associated Cement Companies Ltd. A software program may consist of various commands which enable the computer to perform a designated task. The copyright in that program may remain with the originator of the program. 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 program 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....
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..../or whether the contract is a service contract may arise". The declaration made in the said decision only applies to 'uncanned software' is the submission. It does not apply to a software though canned but adapted to the specification and requirements of the individual client, asserts learned Counsel. We are unable to accept the said contention and immediately notice that it was never declared that an 'uncanned software' or an 'unbranded' one, is not 'goods' and the finding is to the contrary. Their Lordships did not make any observation on unbranded software on the reasoning that in case of sale of unbranded software, the questions like 'situs of contract of sale and/or whether the contract is a service contract may arise'. 12. Imagic Creative Pvt. Ltd is not applicable to the facts of the above case. In Imagic Creative Pvt. Ltd., the Hon'ble Supreme Court was concerned with the services carried out by an advertising agency by creating original concept and design for advertising and supply of design brochures, annual reports, etc. The development of the concept and design was held to be a service distinguished from a sale of goods. Th....