Tata Consultancy Services
Vs. State of Andhra Pradesh
 Insc 681 (5 November 2004)
S.B. Sinha with Civil
Appeal Nos. 2584, 2585 & 2586/98 S.B. Sinha, J :
Whether an intellectual property contained in floppies, disks or CD- ROMs
would be 'goods' within the meaning of Andhra Pradesh General Sales Tax Act,
1957 (hereinafter called as 'the Act') is the question involved in this appeal
which arises out of a judgment and order dated 12th December, 1996 passed by
the Andhra Pradesh High Court.
"Goods" : Meaning The said expression has been defined in Section
2(b) to, inter alia, mean all kinds of moveable property and includes all
materials, articles and commodities. The amplitude of the said expression is
required to be considered with a view to answer the question involved in this
The expression 'goods' is not a term of art. Its meaning varies from statute
to statute. The term 'goods' had been defined in the Act as also in Clause (12)
of Article 366 of the Constitution to include all materials, commodities and
articles. Commodity is an expression of wide connotation and includes every
thing of use or value which can be an object of trade and commerce.
AIR 1976 SC 997] it is stated:
"20. The general rule of construction is not only to look at the words
but to look at the context, the collocation and the object of such words
relating to such matter and interpret the meaning according to what would
appear to be the meaning intended to be conveyed by the use of the words under
the circumstances. Sometimes definition clauses create qualification by
expressions like "unless the context otherwise requires"; or
"unless the contrary intention appears"; or "if not inconsistent
with the context or subject-matter". "Parliament would legislate to
little purpose", said Lord Macnaghten in Netherseal Co. v. Bourne, (1889)
14 AC 228, "if the objects of its care might supplement or undo the work
of legislation by making a definition clause of their own. People cannot escape
from the obligation of a statute by putting a private interpretation on its
language." The courts will always examine the real nature of the
transaction by which it is sought to evade the tax." In Words and Phrases,
Volume 7A, Permanent Edition at page 590, 'commodity' has been defined as
"A "commodity" is an article of trade, a movable article of
value; something that is bought and sold.
U.S. v. Sischo, D.C. Wash., 262 F. 1001, 1005.
The term "commodity" includes every movable thing that is bought
or sold except animals.
Peterson v. Currier, 62 III. App. 163.
"Commodity" meaning that which affords convenience or advantage,
especially in commerce, including everything movable which is bought and sold.
McKeon v. Wolf, 77 III. App.
325." The definition of 'goods' in Sales of Goods Act is also of wide
import which means every kind of movable property. Property has been defined
therein to mean the general property in goods and not merely a special
property. It is not much in dispute that 'goods' would comprehend tangible and intangible
properties, materials, commodities and articles and also corporeal an
incorporeal materials, articles and commodities. If a distinction is sought to
be made between tangible and intangible properties, materials, commodities and
articles and also corporeal and incorporeal materials, the definition of goods
will have to be rewritten of comprising tangible goods only which is
impermissible. This Court, therefore, will have to confine itself to the
question as to whether the concerned software would come within the purview of
"goods". In the Constitution, goods as such is not defined. An
expansive definition with the said expression has been given which is indicated
by the expression "includes". Such an expression is Chemical Biology,
(2002) 5 SCC 111, para 5 & 6].
When the word 'includes' is used in an interpretation clause, it must be
construed as comprehending not only such things as they signify according to
their nature and import but also those things which the interpretation clause
declares that they shall include. [See Scientific Pradesh (1986) 1 SCC 11].
RE: SUBMISSION OF BEHALF OF THE APPELLANT Reference by Mr. Sorabjee to the
provisions of Copyright Act, in my opinion, was not apposite.
Copyright Act and the Sales Tax Act are also not statutes in pari materia
and as such the definition contained in the former should not be Hyderabad AIR
2000 SC 3195, p. 3201] In absence of incorporation or reference, it is trite
that it is not permissible to interpret a word in accordance with its definition
in other statute and more so when the same is not dealing with any cognate
442] It may not be necessary for us to rely upon the decisions of this Court
10 SCC 420]. It is also not necessary to rely upon the Australian decision,
(93) Australian Law Reports 523] which is said to have been reversed in Re:
ASX Operations Pty Ltd. and Australian Stock Exchange Ltd. and Pont Data
Australia Pty Ltd.[FED No. 710 Trade Practices (1991) ATPR para 41-069 97 ALR
513/19 IPR 323 27 FCR 460.
However, we may notice that the Federal Court of Australia while reversing
the judgment was of the opinion that as the definition of 'goods' contained in
Sub-Section (4) of Section 4 of the TP Act included gas and electricity, the
same would not be held to mean further including "encoded electrical
impulses". It was, however, noticed:
"We should add that in Toby Constructions Products Pty Ltd. v Computa
Bar (Sales) Pty Ltd.
(1983) 2 NSWLR 48, Rogers J. held that a sale of a computer system,
comprising both hardware and software, was a sale of "goods" within
the meaning both of the Sale of Goods Act 1923 (N.S.W.) and the warranties
implied by Part V of the TP Act. His Honour said (supra) at 54), with reference
to United States authorities, that he did not wish it to be thought he was of
the view that software by itself may not be "goods". This is a
question which is left open after the present appeal, which, as will be
apparent, has decided a narrower point." The standard works on software by
Mr. Rahul Matthan and Mr. Roger S. Pressman, relied upon by Mr. Sorabjee, may
be relevant for proper understanding as to what a software is and what is the
nature and character of software and in ordinary parlance may contrast a book,
ordinary video or audio cassette but it is well settled that the applicability
of the statute would depend upon its purport and object. Taxability of a
software has its history in other countries. Its journey in American courts
started in the Seventies.
There had been a difference of opinion in different jurisdictions as regards
taxability of the software. The majority of the courts held that it is
intangible property, but the Federal Supreme Court said that it is not so. The
State Legislatures made amendments as a result whereof a shift in the approach
started. Having regard to the changes in definition even the American Courts
began holding that tax can be imposed on such softwares.
In Advent Systems Ltd. vs. Unisys Corpn, 925 F. 2d 670 (3rd Cir.
1991), relied on by Mr. Sorabjee, the court was concerned with
interpretation of uniform civil code which "applied to transactions in
The goods therein were defined as "all things (including specially
manufactured goods) which are moveable at the time of the identification for
sale". It was held :
"Computer programs are the product of an intellectual process, but once
implanted in a medium are widely distributed to computer owners. An analogy can
be drawn to a compact disc recording of an orchestral rendition. The music is
produced by the artistry of musicians and in itself is not a "good,"
but when transferred to a laser-readable disc becomes a readily merchantable
commodity. Similarly, when a professor delivers a lecture, it is not a good,
but, when transcribed as a book, it becomes a good.
That a computer program may be copyrightable as intellectual property does
not alter the fact that once in the form of a floppy disc or other medium, the
program is tangible, moveable and available in the marketplace.
The fact that some programs may be tailored for specific purposes need not
alter their status as "goods" because the Code definition includes
"specially manufactured goods." The topic has stimulated academic
commentary with the majority espousing the view that software fits within the
definition of a "good" in the U.C.C.
Applying the U.C.C. to computer software transactions offers substantial
benefits to litigants and the courts.
The Code offers a uniform body of law on a wide range of questions likely to
arise in computer software disputes: implied warranties, consequential damages,
disclaimers of liability, the statute of limitations, to name a few.
The importance of software to the commercial world and the advantages to be
gained by the uniformity inherent in the U.C.C. are strong polity arguments favoring
inclusion. The contrary arguments are not persuasive, and we hold that software
is a "good" within the definition in the Code." In Colonial Life
Insurance Co. vs. Electronic Data Systems Corp. 817 F. Suppl. 235 (supra),
Advent Systems Ltd. (supra) was followed.
Linda A. Sharp, J.D., in an Article titled "Computer Software or
Printout Transactions as subject to State Sales or Use Tax", published in
36 ALR 5th 33, noticed the development of law as well as technological
development of computers and opined that a tape containing a copy of a canned
programme does not lose its tangible character because its content is a
reproduction of the product of intellectual effort just as the phonorecord does
not become intangible because it is a reproduction of the product of artistic
effort. The learned author referred to a large number of case laws wherein such
a statement of law was enunciated. In the article various statutes defining
software as tangible goods had also been taken notice of.
Strong reliance has been placed by Mr. Sorabjee on a judgment of Illinois
Supreme Court in First National Bank of Springfield vs. Department of Revenue,
[421 N.E.2d 175, 85 III2d 84, 421 NE2d 175], wherein software was held to be
intangible personal property on the premise :
"The tapes were certainly not the only medium through which the
information could be transferred. In this way, the tapes differ from a movie
film, a phonograph record or a book, whereby the media used are the only
practicable ways of preserving those articles. Thus, while those articles and
the apes are similar in that they physically represent the transfer of ideas or
artistic processes, whereas computer programs are separable from the tapes. Not
only may software information be conveyed any number of ways, but it may even
be copied off of the tapes and stored, sing another medium. (see Bryant &
Mather, Property Taxation of Computer Software, 18 N.Y.L.F. 59, 67 (1972). In
short, it is not the tapes which are the substance of the transaction is, in
instance, the transfer of intangible personal property and, as such, is not
taxable. Under the Illinois Use Tax Act." The said decision was rendered
in 1981. However, subsequently in Comptroller of the Treasury vs. Equitable
Trust Company [464 A.2d 248], an earlier decision of the Tennessee Court in
Commerce Union Bank vs.
Tidwell, [538 *473 S.W.2d 405], as also First National Bank of Springfield
(supra), were considered wherein it was observed :
"We can take judicial notice, based on modern human experience, that
the technology, exists for producing a copy of a movie film on disc, of a
phonograph record on tape, and of a book on microfiche. We have previously
discussed how the program copy is not separated from the tape, when it is used
in the computer. See B.U. Note, supra, at 188-89. To remove the program copy
from the magnetic tape requires that it be overwritten, or obliterated in a
magnetic field, in the way in which one dictating on tape makes corrections or
wipes the tape clean." Thus, the court found a change in the concept and
noticed a departure from earlier view that the computer software was intangible
property. The argument of severability which had held the field was also
Noticing several other judgments, it was held :
"What is troublesome about (the tax court) approach is the fact that,
while a substantial portion of the software is of a tangible nature, i.e.
punched cards, magnetic tapes, instructions covering operation or applications,
(for property tax purposes) the remainder consists of personal services to be
rendered after purpose." In the aforementioned premise, it also negatived
the contention which incidentally has been raised by Mr. Sorabjee that the
price paid for a copy of a canned programme reflects the cost of developing the
programme which the proprietor hopes to recover, with profit, by spreading the
cost among its customers, stating :
"Simply because the canned program on tape is much more expensive than
the typical phonorecord, the program tape is not any less tangible." In
Compuserve, INC vs. Lingley [535 N.E. 2d 360], the court disagreed with the
opinions contained in the earlier judgments and stated the law in the following
"Thus, the essence of the transaction in the sale of computer software
was the purchase of nontaxable intangible information. The Missouri Supreme
Court in James and the Texas Court of Civil Appeals in First National Bank of
Fort Worth also used an essence-or- purpose-of- the-transaction test to
determine that computer software is intangible property.
The Supreme Court of Ohio in Interactive Information Systems, Inc. vs.
Limbach (1985), 18 Ohio st. 3d 309, 311, 18 OBR 356, 357-358, 480 N.E. 2d 1124,
1126, in determining the taxability of computer hardware also recognized that
computer programs are intangible property when the court stated :
"Prior to encoding the tape, the appellee is dealing with
intangibles-ideas, plans, procedures, formulas, etc.; and, although these
intangibles are in some respects transformed or converted (or 'organized') into
a different state or form, such transformation or conversion is not
'manufacturing' because no 'material or thing' has been transformed or
converted." (Emphasis sic.) The Supreme Court of Ohio also distinguished
that the tapes were tangible, while the computer information was intangible.
The courts that have found computer software to be tangible have based their
decisions on the fact that the computer program was coded on a tangible medium,
such as a computer tape. See Citizens & Southern Systems, Inc. vs. South
Carolina Tax Comm. (1984), 280 S.C.
138, 311 S.E. 2d 717; Hasbro Industries, Inc. vs. Norberg (R.I. 1985), 487
A.2d 124; Chittenden Trust Co. v. King (1983), 143 Vt. 271, 465 A.2d 1100; and
Comptroller of the Treasury v. Equitable Trust Co. (1983), 296 Md. 459, 464
A.2d 248 (finding that only noncustomized computer software is tangible
property)." It is true that in Compuserve, Inc. (supra), the court found
that the computer software developed by the appellants therein was intangible
property, but a perusal of the said judgment shows the other views of the other
courts were noticed therein wherein computer software was held to be a tangible
property on the ground that the computer programme was coded on a tangible
medium such as a computer tape.
Northeast Datacom, Inc. et al. vs. City of Wallingford [212 Conn.639, 563
A2d 688, was rendered on the premise of the severability doctrine. The said
judgment, however, was rendered keeping in view the statute levying tax on
personal property wherein the phrase "tangible personal property' was
added by amendment in 1961 by Public Act 61 No.
In South Central Bell Telephone Co. v. Sidney J. Barthelemny, et al.
[643 So. 2d 1240 : 36 A.L.R. 5th 689], the Supreme Court of Louisiana
noticed the definition of 'tangible personal property' which was in the
following terms :
"Personal property which may be seen, weighed, measured, felt or
touched, or is in any other manner perceptible to the senses. The term
'tangible personal property' shall not include stocks, bonds, notes or other
obligations or securities." It was held :
"The term "tangible personal property" set forth in the City
Code, and its synonymous Civil Code concept "corporeal movable", must
be given their property intended meaning. Physical recordings of computer
software are not incorporeal rights to be comprehended by the understanding.
Rather, they are part of the physical world. For the reasons set out below, we
hold the computer software at issue in this case constitutes corporeal property
under out civilian concept of that term, and thus, is tangible personal
property, taxable under ' 56-21 of the City Code." The court, however,
noticed that the shift in the trend was not uniform. Having regard to the fact
that the computer software became the knowledge and understanding and upon
discussing the characteristics of computer software and classification thereof
as tangible or intangible under Louisiana law, it was held :
"The software itself, i.e. the physical copy, is not merely a right or
an idea to be comprehended by the understanding. The purchaser of computer
software neither desires nor receives mere knowledge, but rather receives a
certain arrangement of matter that will make his or her computer perform a
desired function. This 13 arrangement of matter, physically recorded on some
tangible medium, constitutes a corporeal body.
We agree with Bell and the court of appeal that the form of the delivery of
the software-magnetic tape or electronic transfer via modem- is of no
However, we disagree with Bell and the court of appeal that the essence or
real object of the transaction was intangible property . That the software can
be transferred to various media i.e. from tape to disc, or tape to hard drive,
or even that it can be transferred over the telephone lines, doles not take
away from the fact that the software was ultimately recorded and stored in
physical form upon a physical object. See Crockett, supra, at 872-74; Shontz,
at 168-70; Cowdrey, supra, at 188-90. As the court of appeal explained, and as
Bell readily admits, the programs cannot be utilized by Bell until they have
been recorded into the memory of the electronic telephone switch. 93-1072, at
p. 6, 631 So.2d at 1342. The essence of the transaction was not merely to
obtain the intangible "knowledge" or "information", but
rather, was to obtain recorded knowledge stored in some sort of physical form
that Bell's computers could use. Recorded as such, the software is not merely
an incorporeal idea to be comprehended, and would be of no use if it were.
Rather, the software is given physical existence to make certain desired
physical things happen.
One cannot escape the fact that software, recorded in physical form, becomes
inextricably intertwined with, or part and parcel of the corporeal object upon
which it is recorded , be that a disc, tape, hard drive, or other device.
Crockett, supra, at 871072; Cowdrey, Supre, at 188-90.
That the information can be transferred and then physically recorded on
another medium is of no moment, and does not make computer software any
different than any other type of recorded information that can be transferred
to another medium such as fil, video tape, audio tape, or books." It was
further opined :
"It is now common knowledge that books, music, and even movies or other
audio/visual combinations can be copied from one medium to another. They are
also all available on computer in such forms as floppy disc, tape, and CD-ROM.
Such movies, books, music, etc.can all be delivered by and/or copied from one
medium to another, including electrical impulses with the use of a modem.
Assuming there is sufficient memory space available in the computer hard disc
drive such movies, books, music, etc.can also be recorded into the permanent
memory of the computer such as was done with the software in this case.
93-1072, at p. 4, 5. 631 So.2d at 1346-47 (dissenting opinion). See also
Shontz. Supra, at 168-170;
Harris, supra, at 187.
That the information, knowledge, story, or idea, physically manifested in
recorded form, can be transferred from one medium to 15 another does not affect
the nature of that physical manifestation as corporeal, or tangible. Shontz,
supra, at 168-170.
Likewise, that the software can be transferred from 1248 one type of physical
recordation, e.g., tape, to another type, e.g., disk or hard drive, does not
alter the nature of the software, Shontz, supra, at 168-170; it still has
corporeal qualities and is inextricably intertwined with a corporeal object.
The software must be stored in physical form on some tangible object somewhere"
Reversing the findings of the court below that the computer software
constitutes intellectual property, it was opined :
"In sum, once the "information" or "knowledge" is
transformed into physical existence and recorded in physical form, it is
corporeal property. The physical recordation of this software is not an
incorporeal right to be comprehended. Therefore we hold that the switching
system software and the data processing software involved here is tangible
personal property and thus is taxable by the City of New Orleans." St.
Albans City :
Mr. Sorabjee submitted that this Court Associated Cement Companies Computers
[1996 (4) All ER 481].
Our attention in this behalf has been drawn to the judgment of Sir Iain
Glidewell which is in the following terms:
"During the course of the hearing, the word 'software' was used to
include both the (tangible) disk onto which the COMCIS program had been encoded
and the (intangible) program itself. In order to answer the question, however,
it is necessary to distinguish between the program and the disk carrying the
In both the Sale of Goods Act, 1979, s 61, and the Supply of Goods and
Services Act 1982, s.18, the definition of goods includes 'all personal
chattels other than things in action and money'.
Clearly, a disk is within this definition. Equally clearly, a program, of
itself, is not." As regard utility of an instruction manual, it was
"As I have already said, the program itself is not 'goods' within the
statutory definition. Thus a matter of the program in the way I have described
does not, in my view, constitute a transfer of goods. It follows that in such
circumstances there is no statutory implication of terms as to quality or fitness
for purpose." The question which arose in that case was as to whether the
defendant therein had breached its contract to supply the plaintiffs with a
computer system to be used in administering their collection of community
charge by providing valid software which significantly overstated the relevant
population of their area and, thus, caused them to suffer a loss of revenue.
The suit for damages was allowed. It was held by the Court of Appeals that
the submission on behalf of the appellant was that the question as to whether
as between the plaintiffs and the defendant the plaintiffs dealt as consumer or
on the defendant's written standard terms of business within Section 3(1) in
the light of the definition of 'business' in Section 14 was answered in the negative
on the ground that one cannot be said to deal on another's standard terms of
business, negotiate with those terms before entering into the contract.
Glidewell, J. noticed that in that case the evidence was that in relation to
many of the programme releases, an employee of ICL went to St. Albans' premises
where the computer was installed taking with him a disk on which the new
programme was encoded and himself performed the exercise of transferring the
programme into the computer. The learned Judge despite holding that the
programme itself is not 'goods' held that such term would employ to all types
of contracts that the programme will be reasonably capable of achieving the
The definition of goods in the said Act does not merely include personal
chattels but all articles, commodities and materials. The definition of goods
in the said Act was wider in term than in Sale of Goods Act, 1979 and the
Supply of Goods and Services Act 1982. Furthermore, here, we are not concerned
with a programme which is not a part of the disk but a programme contained in a
Strict Interpretation or Literal Interpretation :
We, in this case, are not concerned with the technical meaning of computer
and computer programme as in a fiscal statute plain meaning rule 122] In
interpreting an expression used in a legal sense, the courts are required to
ascertain the precise connotation which it possesses in law.
It is furthermore trite that a court should not be over zealous in searching
ambiguities or obscurities in words which are plain. [See Inland It is now
well-settled that when an expression is capable of more than one meaning, the
Court would attempt to resolve that ambiguity in a manner consistent with the
purpose of the provisions and with regard to the consequences of the
alternative constructions. [See Clark & Tokeley Ltd.
Settlement  Ch. 382, it is stated:
"Two methods of statutory interpretation have at times been adopted by
the court. One, sometimes called literalist, is to make a meticulous
examination of the precise words used. The other sometimes called purposive, is
to consider the object of the relevant provision in the light of the other
provisions of the Act the general intendment of the provisions. They are not
mutually exclusive and both have their part to play even in the interpretation
of a taxing statute." Others [(2003) 7 SCC 589] this Court expounded the
theories of purposive JT 2004 (Suppl.1) SC 274] Francis Bennion in his oft
quoted treatise "Statutory Interpretation" at pages 368 & 369
"Subsection (2) Where the enactment is grammatically ambiguous, the
opposing constructions put forward are likely to be alternative meanings each
of which is grammatically possible. Where on the other hand the enactment is
grammatically capable of one meaning only, the opposing constructions are
likely to contrast an emphasized version of the literal meaning with a strained
construction. In the latter case the court will tend to prefer the literal
meaning, wishing to reject the idea that there is any doubt.
Example 149.2 In a tax avoidance case concerning capital transfer tax, the
Court of Appeal were called on to construe the Finance Act 1975 Sch 5 para 6(7)
as originally enacted. Counsel for the Inland Revenue put forward several
alternative arguments on construction, but the court preferred the one based on
the unglossed literal meaning. It may be conjectured however that the other
arguments helped to convince the court that the Inland Revenue's case was to be
preferred." A statute ordinarily must be literally construed. Such a
literal construction would not be denied only because the consequence to comply
the same may lead to a penalty. This aspect of the matter has been considered
by this Court in Indian Handicrafts Emporium (supra).
Proceeding on the basis that there existed a dichotomy, the Court ultimately
held that the resolution will have to be reached by reading the entire statute
SCC 199] 628] this Court held:
"The Courts will reject that construction which will defeat the plain
intention of the Legislature even though there may be some inexactitude in the
language used. Reducing the legislation futility shall be avoided and in a case
where the intention of the Legislature cannot be given effect to, the Courts
would accept the bolder construction for the purpose of bringing about an
The Courts, when rule of purposive construction is gaining momentum, should
be very reluctant to hold that Parliament has achieved nothing by the language
it used when it is tolerably plain what it seeks to achieve." Referring to
its earlier decisions, this Court opined :
"36. These decisions are authorities for the proposition that the rule
of strict construction of a regulatory/penal statute may not be adhered to, if
thereby the plain intention of Parliament to combat crimes of special nature
would be defeated." India & Anr., 2004 (7) SCALE 158] So long natural
meaning for the charging section is adhered to and when the law is certain,
then a strange meaning thereto should not be given.
Consultancy Services and Ors., JT 2004 (4) SC 587] Although normally a
taxing statute is to be strictly construed but when the statutory provision is
reasonable akin to only one meaning, the principles of strict construction may
not be adhered to. [See Commnr. of Central Determination :
A software may be intellectual property but such personal intellectual
property contained in a medium is bought and sold. It is an article of value.
It is sold in various forms like floppies, disks, CD-ROMs, punch cards,
magnetic tapes, etc. Each one of the mediums in which the intellectual property
is contained is a marketable commodity. They are visible to senses.
They may be a medium through which the intellectual property is transferred
but for the purpose of determining the question as regard leviability of the
tax under a fiscal statute, it may not make a difference. A programme
containing instructions in computer language is subject matter of a licence.
It has its value to the buyer. It is useful to the person who intends to use
the hardware, viz., the computer in an effective manner so as to enable him to
obtain the desired results. It indisputably becomes an object of trade and
commerce. These mediums containing the intellectual property are not only
easily available in the market for a price but are circulated as a commodity in
the market. Only because an instruction manual designed to instruct use and
installation of the supplier programme is supplied with the software, the same
would not necessarily mean that it would cease to be a 'goods'. Such
instructions contained in the manual are supplied with several other goods
including electronic ones. What is essential for an article to become goods is
At this juncture, we may notice the meaning of canned software as under:
"(7) 'Canned ?software'?means that is not specifically created for a
particular consumer. The sale or lease of, or granting a license to use, canned
software is not automatic data processing and computer services, but is the
sale of tangible personal property. When a vendor, in a single transaction,
sells canned software that has been modified or customized for that particular
consumer, the transaction will be considered the sale of tangible personal
property if the charge for the modification constitutes no more than half of
the price of the sale." [See STATE-CASE APP-CT,OH-TAXRPTR 402-978 Ohio
Board of Tax Appeals, Aeroquip Cop. Page 9 of 12] The software marketed by the
Appellants herein indisputably is canned software and, thus, as would appear
from the discussions made hereinbefore, would be exigible to sales tax.
It is not in dispute that when a programme is created it is necessary to
encode it, upload the same and thereafter unloaded. Indian law, as noticed by
my learned Brother, Variava, J., does not make any distinction between tangible
property and intangible property. A 'goods' may be a tangible property or an
intangible one. It would become goods provided it has the attributes thereof
having regard to (a) its utility; (b) capable of being bought and sold; and (c)
capable of transmitted, transferred, delivered, stored and possessed. If a
software whether customized or non-customized satisfies these attributes, the
same would be goods. Unlike the American Courts, Supreme Court of India have
also not gone into the question of severability.
India Ltd. [2004 (8) SCALE 169] this Court has held that operational
software loaded in the hard disk does not lose its character as tangible goods.
If a canned software otherwise is 'goods', the Court cannot say it is not
because it is an intellectual property which would tantamount to rewriting the
judgment. In Madan Lal Fakirchand Dudhediya vs. Shree Changdeo Sugar Mills Ltd.
[(1962) Suppl. 3 SCR 973], this Court held that the court cannot rewrite the
provisions of law which clearly is the function of the Legislature which
I respectfully agree with the opinion of Variava, J. that the appellant
herein is liable to pay sales tax on the softwares marketted by it and the
appeals should be dismissed.