Brief : Info tech Software Dealers Association (hereinafter referred to as “the ISODA” or the “Petitioner”) is a society registered under the Societies Registration Act having its headquarters at Mumbai. Members of ISODA are engaged in the business of reselling of computer software products falling under 3 categories – (i) Shrink Wrap Software; (ii) Multiple User Software/ Paper License and (iii) Internet Download.
The ISODA filed the subject petitions under Article 226 of The Constitution of India, praying for the issue of a Writ of Declaration to declare Section 65(1 05)(zzzze) of Chapter V of Finance Act, 1994 (as amended by Finance No. 2 Act of 2009) (hereinafter referred as “the Finance Act”) in relation to the business activities of the members of the Petitioner as:
• Null and void;
• Ultra vires and unconstitutional of the provisions of Article 245, Entries 92C and 97 of List-I, Entry 54 of List-II of Schedule VII of the Constitution of India; and
• Contrary to provisions of Articles 14, 19(1)(g), 265 and 268A of the Constitution of India.
The writ petitions raised the following three questions:
• Whether software is goods?
• Whether supply of software pursuant to the End User License Agreement is to be treated as sale or service?
• Whether the Parliament has the legislative competency to levy Service Tax on Information Technology Software Services?
Citation: Order of the Madras High Court dismissing the Writ Petitions filed by Info tech Software Dealers Association (W.P. Nos. 3811 and 18886 of 2009)
Court : Madras High Court
Contentions of the Petitioner:- The Petitioner put forth the following contentions:
· As the ultimate transaction in resale of software is only sale of goods, an element of service is absent and in such circumstances, the State Government alone is competent to enact a law under Entry 54 of List II of Schedule VII of the Constitution of India. Accordingly, the provisions of Section 65(105)(zzzze) of the Finance Act, particularly sub-clauses (v) and (vi) are unconstitutional in the facts of the case, as it is beyond the legislative competence of the Parliament.
Contentions of the Respondents:-The contentions of the respondents were as follows:-
· The amendment would fall under Entry 97 of List I of Schedule VII of the Constitution of India and the challenge to the legislative competency of the Parliament is totally unsustainable.
Observations of the High Court:- The following observations were made by the High Court of Madras
· Article 366(12) of the Constitution of India defines the expression “goods”, which includes all materials, commodities and articles. It is an inclusive definition.
– The law as to whether the software is goods or not is no longer res integra.
– The term ‘all materials, articles and commodities’ includes both tangible and intangible/ incorporeal property which is capable of abstraction, consumption and use and which can be transmitted, delivered, stored, possessed etc. A software is an intellectual property and it is an article of value.
– Indian law does not recognize or make a distinction between tangible property and intangible property. ‘Goods’ may be a tangible property or an intangible one.
Conclusions :-The writ petitions were dismissed with the following conclusion:
Do you think #GST Council should provide option to Revise Form GSTR-3B?— Tax Guru (@taxguru_in) November 13, 2017
Please Comment, Like, Vote and Retweet the Poll.