The appellants provide, inter-alia, <\/em>computer consultancy services and also sell custom-made software which are uploaded on the computers of the customers (uncanned software) and computer software packages off-the-shelf (canned software). The appellants are licensees for the canned software since the owner thereof is another person. In case of canned software, the assessing officer under the AP General Sales Tax Act held that they were \u201cgoods\u201d liable to sales tax. The first appellate authority,\u00a0 Tribunal\u00a0 as well as the High Court dismissed the appeal\u00a0 of the appellants.<\/p>\n \u00a0<\/p>\n Whether canned software are \u201cgoods\u201d liable to sales tax?<\/p>\n \u00a0<\/p>\n The appellant\u2019s contention before the Court was that \u201ccanned software\u201d is nothing but a series of commands issue to the hardware of the computer that enables the computer to complete a designated task. To make this task effective, the sequence\u00a0 of instructions is required to be stored physically on a magnetic medium such as CD-ROM, Floppy Disc, etc. Software comprises of programs, data and documents.\u00a0It is an intellectual property and not any commodity covered by definition of \u201cgoods\u201d under either APGST Act or Constitution. They are intangible goods which\u00a0 are not perceived as \u201cgoods\u201d. The magnetic tapes or discs are only means of transmitting the intellectual creations from the originator to the user. The job of transmission could have been done by personal instructions of the originator in which case there would not have been any goods or tax thereon. Therefore, they\u00a0 are not goods. Upon sale of disc or floppy, there is no transfer of all the rights\u00a0\u00a0 \u00a0that the owner has. For example, right to produce and sell more copies, right to change the underlying work, right to license its use to others, right to transfer the copyright itself. These are incorporeal incidents which are not transferred along with the medium like disc\/floppy.<\/p>\n \u00a0<\/p>\n \u00a0<\/p>\n On the other hand, the revenue argued that the term \u201cgoods\u201d was very wide and included tangible as well as intangible goods. The properties which are capable\u00a0\u00a0\u00a0\u00a0 of being abstracted, consumed or used and\/or transmitted transferred, delivered, stored or possessed are \u201cgoods\u201d for the purpose of Sales Tax Act.<\/p>\n Various judgements referred to bring home the point that even intangible\/ incorporeal properties are goods.<\/p>\n Associated Cement Companies Ltd. v. Commr. of Customs (2001) 4 SCC 593 (SC) <\/em><\/strong>– Technical material in the form ofdrawings, manuals, discs etc are goods.<\/p>\n The Court observed that there is no difference in a book, canvas painting, music cassette and software package on a disc. In all such cases, intellectual property is incorporated on a media for transfer. Thus, it is held that branded or unbranded software are goods provided they have the characteristics of being bought and sold, transferred, transmitted, possessed, stored etc. The Court also observed that\u00a0\u00a0 it was not required to comment upon unbranded\/customized software because in such case, questions like situs of the contract of sale and whether the contract is service contract can arise.<\/p>\n Per S. B. Sinha J. (concurring)- Considering the definition of \u201cgoods\u2019 under Article 366(12) of the Constitution, Sec. 2(1)(h) of the APGST Act, Sale of Goods Act and dictionary meaning, it was inferred that it covers all intangible and tangible goods as also corporeal and incorporeal goods, commodities, materials and articles. The judgments of American courts were also considered to observe that software is treated as \u201cgoods\u201d even by these Courts. An article written by Linda A. Sharp,<\/p>\n J.D. titled \u201cComputer Software or Printout Transactions as Subject to State Sales Tax or Use Tax\u201d noted the development in technology and law and observed that tape containing a copy of canned program does not lose its tangible character because its content is a reproduction of the product of intellectual efforts and\u00a0\u00a0\u00a0\u00a0\u00a0 is\u00a0 comparable to\u00a0 a\u00a0 phonorecord which does not become intangible because it\u00a0\u00a0 is reproduction of product of artistic efforts. The article referred to a number of decisions treating software as goods.<\/p>\n The Court observed that form of delivery of software, magnetic tape or electronic transfer via modem, is of no relevance. Software is ultimately recorded and stored in physical form on a physical object. The essence of the transaction was not merely to obtain intangible knowledge or information but to obtain recorded knowledge stored in some physical form which transforms it into a<\/p>\n \u00a0<\/p>\n \u00a0<\/p>\n corporeal property. The software when loaded on a physical medium becomes\u00a0\u00a0\u00a0\u00a0\u00a0 a marketable commodity and hence \u201cgoods\u201dprovided it has attributes like<\/p>\n (a) its utility (b) capable of being bought and sold (c) capable of being transmitted, transferred, delivered, stored and possessed. If a software, whether customized or not customized, satisfies these tests, it has to be treated as \u201cgoods\u201d. [CA\u00a0 Nos. 2582\u00a0\u00a0\u00a0 of 1998 and2584-86 of 1998 dt. 05-11-2004]<\/p>\n Editorial<\/em><\/strong>. Branded\/canned software are treated as \u201cgoods\u201d whereas the question relating to unbranded\/customized software is not decided. Under GST law, development, design, programming, customization, adaptation, upgradation, enhancement, implementation of information technology software is treated as \u201cservice\u201d as per entry 5(d) of the Schedule II. But branded software continue to\u00a0\u00a0\u00a0\u00a0 be goods. \u00a0<\/p>\n","protected":false},"excerpt":{"rendered":" Andhra Pradesh General Sales Tax Act , 1957 <\/p>\n S. 2(h): Goods – Canned software-Whether goods – meaning of software-when uploaded on physical medium, becomes marketable goods – properties such as capable of being possessed, stored, transferred, transmitted, bought and sold makes such software \u201cgoods\u201d [S. 2(n), 5, Constitution of India, Art. 366(12) Customs Act, 1962, S. 12, 14, Indian Electricity Act, 191O, S. 39, Transfer of Property Act 1982, S. 4]<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[5],"tags":[],"class_list":["post-12966","post","type-post","status-publish","format-standard","hentry","category-gst-law"],"acf":[],"jetpack_featured_media_url":"","jetpack_shortlink":"https:\/\/wp.me\/p9S2Rw-3n8","jetpack-related-posts":[],"jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/posts\/12966","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/comments?post=12966"}],"version-history":[{"count":2,"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/posts\/12966\/revisions"}],"predecessor-version":[{"id":12968,"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/posts\/12966\/revisions\/12968"}],"wp:attachment":[{"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/media?parent=12966"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/categories?post=12966"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/tags?post=12966"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}Issues 1<\/h3>\n
View<\/h3>\n
CST v. M P. Electricity Board (1969) 1 SCC 200 (SC)-Electricity is goods.<\/h4>\n
\n
State of A. P. v. National Thermal Power Corporation Ltd (2002) 5 SCC 203(SC)-Electricity is goods.<\/h4>\n
\n\u201cInfinite striving to be the best is man\u2019s duty; it is its own reward. Everything else is in
\nGod\u2019s hands.\u201d
\n– Mahatma Gandhi\n <\/p>\n