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6.15 The Bangalore bench of Tribunal was considering an issue in the case of Sasken Technologies Ltd, wherein the "sale of source code of software" (referred as "IPR") was claimed by the above said company as sale of capital asset and accordingly claimed that the profit arising therefrom should be assessed as Capital Gains. The AO treated the same as business income and the view of the AO was upheld by the Tribunal in its decision rendered in ITA 2546/Bang/2019 order dated 16.03.2012. The reasoning given by the Tribunal is relevant here:-

It can be noticed that the Tribunal has expressed the view that the software product developed by an Information Technology company constitutes its revenue asset (akin to stock in trade) and hence the revenue generated on its sale or licensing, constitutes business income. In respect of the software product so developed, the said information technology company may be holding IPR and the transfer of IPR was also held to business receipt. The business model of an information technology company is such that it would retain source code of the software product with itself and would be issuing licenses for using the said software. Once source code is retained, the company could issue "n" number of licenses to its customers, whenever it receives orders from its customers. This is the peculiar feature of the software products. In the above said decision, the Tribunal has used the expression "stock in trade", only to mean that it is a revenue asset and hence would fall under the exceptions given in the definition of Capital asset u/s 2(14) of the Act, since the issue agitated by the above said assessee required consideration of sec.2(14) of the Act.