SUPREME COURT JUDGMENT.
CASE NO.:
Appeal (civil) 2582 of 1998
PETITIONER:
TATA CONSULTANCY SERVICES
V.
RESPONDENT:
STATE OF ANDHRA PRADESH
DATE OF JUDGMENT: 13/03/2001
BENCH:
- Rajendra Babu & R.C. Lahoti.
In these matters the Andhra Pradesh High Court concluded that software is of two categories – (i) software which is specialized and exclusively custom-made to cater to the needs of individual clients, and (ii) software which is standardized and marketed for the use of certain classes of clients, like the Oracle, Lotus, Master Key, N-Export, Ex. Unigraphics, etc. and held that for the purpose of the Andhra Pradesh General Sales Tax Act (herein after referred to as the Act) it is not necessary to consider whether the definition of goods in Section 2(h) of the Act has to be read down so as to exclude software from it. The High Court took the view that the first category may not constitute goods for the purpose of the Act, while the second categories are goods and held that they are leviable to tax.
While on behalf of the respondents the case of the appellants is resisted on the ground that the magnetic tapes, discs, are necessary to carry the programme and for the transfer to the hardware and, therefore, the value of the tapes is equal to the value of the programme; that the fact that the programme can be transmitted through some other means does not take away from the fact that in fact a tangible means was actually used; that music cassettes, phonographs and movie tapes are indistinguishable from discs and tapes because (i) they can also be transmitted by telephone lines and through radio waves, and (ii) the contents of music cassettes etc. are also transferable to some other medium belonging to the purchaser of the right to use; that software is tangible property and software recorded in physical form becomes inextricably linked with the corporeal object upon which it is stored, that is, a disc, tape, hard drive, etc.; that the fact that the information can be transferred and then physically recorded in another medium does not make software any different from any other type of recorded information that can be transferred to another medium such as film, videotape, audio tape or books; that the distinction between books, films, videotapes, audio-tapes etc. on the one hand and computer programme on the other on the basis that the former cannot exist without the tangible medium and the latter can is unsustainable because even a programme has to be stored on some medium like the hard disc and books, music etc. can also be transferred from one medium to another; that in Wal-Mart Stores, Inc v. City of Mobile & County of Mobile, 200-622, Supreme Court of Alabama (1996), the Court said, Software is an arrangement of matter recorded in a tangible medium and, therefore, constitutes a corporeal body; that whether another medium was actually used should be seen.
The final view of the court was that an authoritative pronouncement is required on all these aspects of the matter. In that view of the matter, we think it appropriate to place the papers in these cases before the Hon’ble Chief Justice of India to be referred to a Larger Bench.
Submitted by:- JASJIT PRANJAL.