TMI Blog2010 (1) TMI 9X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 33B because an industrial undertaking has been defined in Section 33B to cover manufacture or processing of goods. - Civil Appeal Nos. 235 with 238-239 of 2010 - - - Dated:- 13-1-2010 - Mr. S.H. Kapadia , Mr. H.L. Dattu and Mr. Surinder Singh Nijjar, JJ. For Appellant(s) Mr. Arijit Prasad,Mr. B.V. Balaram Das. For Respondent(s) Ms. Mahua Kalra. Mr. Shekhar Prit Jha, Mr. Mohan Pandey,Mr. Jagjit Singh Chhabra. J U D G M E N T S.H. KAPADIA, J. Leave granted. 2. A short question which arises for determination in this batch of civil appeals is whether the process by which a blank Compact Disc (CD) is transformed into software loaded disc constitutes manufacture or processing of goods in terms of Section 80IA(1) read with Section 80IA(12) (b), as it stood then, of the Income Tax Act, 1961? 3. For the sake of convenience, we may refer to bare facts mentioned in Civil Appeal @ SLP (C) No. 6847 of 2008. In this appeal, we are concerned with the Assessment Years 1995-96 and 1996-97. 4. Assessee is 100% subsidiary of Oracle Corporation, USA. It is incorporated with the object of developing, designing, improving, producing, marketing, distributing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ases. (1) Where the gross total income of an assessee includes any profits and gains derived from any business of an industrial undertaking or a hotel or operation of a ship (such business being hereinafter referred to as the eligible business), there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the assessee, a deduction from such profits and gains of an amount equal to the percentage specified in sub-section (5) and for such number of assessment years as is specified in sub-section (6). *** *** ** (12) For the purposes of this section, - (a) *** *** (b) industrial undertaking shall have the meaning assigned to it in the Explanation to Section 33B; Explanation to Section 33B Explanation: In this section, industrial undertaking means any undertaking which is mainly engaged in the business of generation or distribution of electricity or any other form of power or in the construction of ships or in the manufacture or processing of goods or in mining. 6. Section 80IA occurs in Chapter VIA which deals with Deductions in respect of certain Incomes. Where the gross total income of an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arify that in this case we are concerned with the Income Tax Act, 1961, as it stood during the relevant Assessment Years. 8. From the details of Oracle Applications, we find that the software on the Master Media is an application software. It is not an operating software. It is not a system software. It can be categorized into Product Line Applications, Application Solutions and Industry Applications. A commercial duplication process involves four steps. For the said process of commercial duplication, one requires Master Media, fully operational computer, CD Blaster Machine (a commercial device used for replication from Master Media), blank/ unrecorded Compact Disc also known as recordable media and printing software / labels. The Master Media is subjected to a validation and checking process by software engineers by installing and rechecking the integrity of the Master Media with the help of the software installed in the fully operational computer. After such validation and checking of the Master Media, the same is inserted in a machine which is called as the CD Blaster and a virtual image of the software in the Master Media is thereafter created in its internal storage device. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pre-recorded media is the same, there is no manufacture because the end product is not different from the original product. We find no merit in this argument. Firstly, as stated above, the input in this case is blank disc. Secondly, the test applied by the Department may not be relevant in the context of computer technology. One of the questions which arose for determination before this Court in the case of Tata Consultancy Services v. State of Andhra Pradesh, 137 STC 620 was whether a software programme put in media for transferring or marketing is goods under Section 2(h) of the Andhra Pradesh General Sales Tax Act, 1957. It was held that a software programme may consist of commands which enable the computer to perform a designated task. The copyright in the programme may remain with the originator of the programme. But, the moment copies are made and marketed, they become goods. It was held that even an intellectual property, once put on to a media, whether it will be in the form of computer discs or cassettes and marketed, it becomes goods. It was further held that there is no difference between a sale of a software programme on a CD/ Floppy from a sale of music on a cassett ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... istinct and different from a pre-recorded audio cassette and the two have different use and name. Applying that test to the facts of the present case, we hold that a blank CD is different and distinct from a pre-recorded CD. In Gramophone Co. of India Ltd. (supra), it was held that an input/ raw-material in the above process is a blank audio cassette. It was further held that recording of an audio cassette on duplicating music system amounts to manufacture because blank audio cassette is distinct and different from pre-recorded audio cassette and the two have different uses and names. In our view, the High Court was right in coming to the conclusion that the judgment of this Court in Gramophone Co. of India Ltd. (supra) is squarely applicable to the facts of the present case. We may add that in the case of Tata Consultancy Services (supra), as stated above, it has been held that a software programme may consist of commands which enable the computer to perform designated task, but, the moment copies are made and marketed, they become goods. Therefore, applying the above judgment to the facts of the present case, we are of the view that marketed copies are goods and if they are goods ..... X X X X Extracts X X X X X X X X Extracts X X X X
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