Case Law Details
Supreme Court (SC) [2010-TIOL-04- SC-IT] in the case of Oracle Software India Ltd. (Taxpayer) on the issue of whether the process of converting a blank compact disc (CD) into a recorded CD, by duplicating the master copy of software on it, constitutes ‘manufacture’ under the Indian Tax Law (ITL) for the purpose of claiming tax holiday. The SC held that the processing of record able media on to a blank CD amounts to ‘manufacture’ under the ITL, as it involves the blank CD being dedicated to a specific use for which it otherwise was not fit. Hence, the Taxpayer was eligible to claim a deduction against its profits for carrying out the operations constituting ‘manufacture’ under the provisions of the ITL.
Background and facts of the case
- The Taxpayer, a 100% subsidiary of Oracle Corporation, USA (OC), was incorporated in India for the purposes of developing, designing, improving, producing, marketing, distributing, buying, selling and importing of computer software.
- The Taxpayer sub-licensed a software developed by OC for the purpose of making copies. In this regard, the Taxpayer imported Master Media (MM) of the software from OC which was duplicated on blank CDs. These blank CDs were packed and sold in the market along with the relevant brouchers. The Taxpayer paid a lump-sum amount to OC for the import of the MM and also royalty at the rate of 30% of the price of the licensed product. The only right which the Taxpayer had was to replicate/ duplicate the software. It did not have any right to vary, amend or make value addition to the software embedded in the MM.
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