Is Installing Software A Service Or Sale Of Goods?

Bombay High Court hears a case involving Axis Bank and the Municipal Corporation in this regard.

hidden December 26, 2007 13:00:45 IST
Is Installing Software A Service Or Sale Of Goods?

Is Installing Software A Service Or Sale Of GoodsDoes installation of a software programme amount to rendering a service or is it a sale of goods? This question is being looked upon by Bombay High Court in a case involving Axis Bank and the Municipal Corporation.

Axis Bank (former UTI Bank), earlier this year, hired the IT major Infosys for upgrading its computer system. It bought Infosys-developed software called Finnacle.

Now, since Infosys is a Bangalore-based company, Municipal Corporation of Greater Mumbai is demanding octroi on the transaction, and the bank is not willing to pay it.

MCGM sent a notice to the bank a few months back. The bank is disputing it before the High Court.Bank's contention is that it did not buy any "goods" from Infosys; the latter sent its engineers to Mumbai to install the software. So it was a service contract, not a sale of goods. There is no demand of service tax, it contends.

Its lawyer also pointed out before division bench of Chief Justice Swatanter Kumar and J P Deodhar last week that Infosys merely sold a license to use the software, not the software itself. But MCGM's lawyer K K Singhvi countered this argument by pointing out that even though it was a computer programme, Infosys engineers must have carried it on a floppy or a CD. This amounts to movement of goods into the city, which must attract octroi, Singhvi argued.

PTI

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