Microsoft gets bitten in the bum

Discussion in 'NZ Computing' started by Lawrence D'Oliveiro, Apr 3, 2008.

  1. This one's a subtle case
    <http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=7095>.
    For years, Microsoft has had (as I understand it) a wholly-owned subsidiary
    shell company called "Gracemac", whose sole function seemed to be to
    represent its intellectual property rights in India. This company never
    made or distributed any product: instead, those rights were delegated back
    (via Singapore) to the US, where the actual product manufacturing took
    place. These products were then sent to distributors in India, and from
    there to the actual customers, without any involvement from Gracemac.

    By doing some complex accounting fiddles, Microsoft were able to claim that
    the money accrued by a circuitous path back to Gracemac had already been
    subject to tax in the US, and therefore was not taxable income in India
    under the double-taxation agreement between the two countries.

    However, this has fallen foul of a clause in Microsoft's own software
    licence agreement. As you know, it specifically says "this software is
    licensed, not sold". As a result, Gracemac has been deemed to be receiving
    royalties on the licence, and these are subject to tax within India.

    This conclusion was further reinforced by Microsoft's infamous "product
    activation" system:

    The quasi-judicial authority further notes that ''I am of considered
    view that the argument of the AR that appellant had sold software under
    scheme “full packaged product†and “volume purchase product†to Indian
    customer is factual incorrect statement. The correct fact is that
    appellant had licensed these software to its customers in India to copy
    the same on a specified machine and to use it ... in lieu there of a
    consideration.''

    What further strengthens the Revenue's case is the fact that customers
    after acquiring a copy of the software further require permission from
    appellant to activate and use the software on a specified computer at
    specified location.

    It is pertinent to mention here that Microsoft Activation System located
    in different part of the world are owned and controlled by appellant and
    these systems get integrated with Master Activation System in USA. In
    other words, it is quite clear from above facts of this case that
    customers never had ownership over the software to use the same as their
    own sweet will but had only right to copy software on specified computer
    and to use software.

    Closed-source software licences so often reserve all rights to the vendor
    and none to the user, it makes a change to see consequences arise back to
    the vendor once in a while.
     
    Lawrence D'Oliveiro, Apr 3, 2008
    #1
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  2. Lawrence D'Oliveiro

    Nik Coughlin Guest

    "Lawrence D'Oliveiro" <_zealand> wrote in message
    news:ft3n80$sgs$...
    > However, this has fallen foul of a clause in Microsoft's own software
    > licence agreement. As you know, it specifically says "this software is
    > licensed, not sold". As a result, Gracemac has been deemed to be receiving
    > royalties on the licence, and these are subject to tax within India.


    This is the same thing that record companies do. Royalties to artists are
    higher for licenses than they are for sales. Therefore when a song is sold
    through iTunes, it is a sale and not a license when it comes to paying the
    artist, but it is a license and not a sale when it comes to the rights of
    the purchaser. The recording industry can apparently have their cake and
    eat it too.
     
    Nik Coughlin, Apr 4, 2008
    #2
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  3. Lawrence D'Oliveiro

    Mike Dee Guest

    Lawrence D'Oliveiro <_zealand> wrote:

    > This one's a subtle case


    Who's?

    --
    dee
     
    Mike Dee, Apr 4, 2008
    #3
  4. In article <Xns9A76E1F332F8Femteedee@193.201.53.67>, Mike Dee did write:

    > Lawrence D'Oliveiro <_zealand> wrote:
    >
    >> This one's a subtle case

    >
    > Who's?


    Who is what?
     
    Lawrence D'Oliveiro, Apr 5, 2008
    #4
  5. Lawrence D'Oliveiro

    Enkidu Guest

    Lawrence D'Oliveiro wrote:
    > In article <Xns9A76E1F332F8Femteedee@193.201.53.67>, Mike Dee did write:
    >
    >> Lawrence D'Oliveiro <_zealand> wrote:
    >>
    >>> This one's a subtle case

    >> Who's?

    >
    > Who is what?
    >

    He was making fun of your apostrophe.

    Cheers,

    Cliff

    --

    Have you ever noticed that if something is advertised as 'amusing' or
    'hilarious', it usually isn't?
     
    Enkidu, Apr 5, 2008
    #5
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