TATA CONSULTANCY SERVICES Vs. STATE OF ANDHRA PRADESH

JUDGEMENT

(1.) A Common question is argued in the writ petition as well as in the tax revision cases, therefore they are being disposed of by a common judgment.

(2.) The petitioners in the writ petition seek a declaration that section 2(n) read with explanation IV, sections 5 and 5-E of the Andhra Pradesh General Sales Tax Act, 1957 (for short, "the APGST Act") are ultra virus the Constitution of India and the legislative competence of the Andhra Pradesh Legislature in so far as they seek to levy tax on the amounts received on the transfer of the right to use the software and the consequential relief restraining the respondents from taking any steps in furtherance of the impugned provision and also directing the respondents to withdraw the levy among other consequential reliefs.

(3.) There are two petitioners in the writ petition. The first petitioner is an association of 238 software and service companies, the list of which is enclosed to the writ petition, and the second petitioner is the resident manager of Tata Consultancy Services which is one of the members of the first petitioner. The members of the first petitioner are developing software for computers. They say that software is purely an intellectual property, which is not "goods" as defined in the APGST Act. Computer software programme consists of a set of statements or instructions to be used directly or indirectly in a computer in order to bring about a certain result, that is "source code" or "object code". A programmer expresses his thoughts in a conventional symbolic programming language, analogous to expressing his thoughts in the staff notations used for music. This expression is usually written in a form known as "source code". It contains a combination of computer language words and human language words. The writing of a computer programme in "source code" is the first and most essential step in the expression of the intellectual thoughts of the programmer. The programmer converts the "source code" into another form, known as "object code" which is a binary representations of the programme - ones and zeros - that is capable of being copied into a computer for execution. The object code is an automatic transformation of the source code and is in effect a copy of the source code. The provocation for the writ petition is the instructions in Ref. No. CCT/A1(2)/2050/93 issued by the Commissioner of Commercial Taxes, Andhra Pradesh, respondent No. 2 herein, to all the assessing authorities stating that the software banded as floppies be treated as "goods" and the sales tax be levied under the APGST Act. The said instructions were communicated by the Assistant Commercial Tax Officer to the second petitioner by letter dated 25/05/1994. Stating that those instructions affect many of the members of the first petitioner and directly affect the second petitioner, this writ petition is filed for the reliefs mentioned above.