The Hindu Business Line : ‘Unbranded/customised software’ marketed by Infosys eligible for ST benefits: HC

Chennai, Aug. 4 The Madras High Court has held that Infosys Technologies Ltd., Chennai, leading developers and marketers of unbranded/customised software for system upgradation, was entitled to benefits of issuing Form ‘C’ declarations under Section 2 (d) of the Central Sales Tax Act, 1956 & corresponding to Sec 2 (3) of TN General Sales Tax Act, 1959.

The court, which heard the writ petitions preferred by the company, challenging the order dated October 31, 2005 of the Special Commissioner & Commercial of Commercial Taxes, Chennai (1st respondent) holding that the petitioners were not entitled to use the Form ‘C’ for their purchases for use in preparation of uncanned software, set aside the said order.

Mr Justice K. Chandru, in his order citing judgments of the Supreme Court, said the question whether uncanned software was amenable to the sales tax law was dealt with by the apex court in Tata Consultancy Services v. State of Andhra Pradesh [2005(1)SCC 308 = (2004) 137 STC 620]. The Constitution Bench of the Supreme Court held that branded software was ‘goods’. The Bench also agreed with the submission of the petitioner in that case that there was no distinction between branded and unbranded software. The majority opinion in the said judgment held that they were not expressing any opinion on that issue.

The Judge said, in his concurring opinion in the very same judgment, Mr S.B. Sinha J, ruled that a ‘goods’ might be tangible property or an intangible one. It would become ‘goods’ provided it had attributes thereof having regard to (a) its utility; (b) capable of being bought and sold; and (c) capable of being transmitted, transferred, delivered, stored and possessed. If a software satisfied these attributes, the same would be goods.

Mr Justice Chandru said that in the light of the pronouncement of the apex court, the 1st respondent’s reasoning in the impugned order of October 31, 2005 would have to be necessarily set aside. The consequential order dated November 15, 2005 of the CTO, Thiruvanmiyur Assessment Circle, informing the petitioners that the request for Form ‘C’ would not be considered, would also have to be set aside. Hence, the said orders were set aside.

In the light of the common order passed by this court, the respondents were directed to act according to the dicta laid down by the Supreme Court.

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