2020 (12) TMI 1012 - AT - Service Tax

Renting of immovable property Service - Bundled services - Appellant had entered into agreements with films Distributors under which the theatrical exhibition rights for exhibition of the films were transferred to the Appellant, either for a specified number of shows and period or in perpetuity - HELD THAT - The agreements entered into between the Appellant and the film Distributors clearly indicate that the film Distributors had granted theatrical exhibition rights to the Appellant and in return of transfer of such rights, the Appellant had agreed to pay certain amount to the Distributors, fixed generally as a percentage of Net Box Office Collection. The Principal Commissioner found that the Appellant had provided renting of immovable property services. For an activity to fall under renting of immovable property services, the nature of the activity should be that of renting or letting or leasing or licensing or other similar arrangements of immovable property, for use in the course or furtherance of business or commerce - A perusal of the agreements between the Appellant and the Distributors would also make it abundantly clear that it is the Appellant who makes payment to the Distributors for grant of theatrical rights. This clearly indicates the flow of service and the consideration. Thus, as it is the Appellant who pays a fixed consideration to the Distributor, no service tax can be levied on the Appellant - it is not possible to sustain the finding recorded by the Principal Commissioner that renting of immovable property service had been rendered by the Appellant to the film distributors. Renting of Immovable Property - amount received by the Appellant under miscellaneous receipts and license fee from Snack Bar - demand of service tax - HELD THAT - The confirmation of demand of ₹ 36,000/- covered under renting of immovable property service is much below the threshold exemption of ₹ 10,00,000/- provided in the notification dated June 20, 2012 and hence not liable to service tax. The income received by the Appellant under Shots and Slides Hire income is on account of exhibition of advertisement films and slides of vendors, during the showcasing of movies. This income is not taxable w.e.f July 1, 2012 as it covered under the negative list provided under section 66 D(g) of the Finance Act, which relates to selling of space or time slots for advertisement, other than advertisement broadcast by radio or television. Even for the period prior to July 1, 2012, this service is in the nature of exhibiting shots/graphic films, still slides and cannot be classified as renting of immovable property service - interest amount income shown by the Appellant in its books of account represents the income earned by the Appellant from the deposits held in bank account and is not towards the renting of immovable property service. Appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
1. Whether the Appellant provided "renting of immovable property" services to film distributors.
2. Whether the Appellant is liable to pay service tax on "miscellaneous receipts" and "license fee" from the Snack Bar.
3. Applicability of the extended period of limitation for the demand of service tax.

Issue-wise Detailed Analysis:

1. Provision of "Renting of Immovable Property" Services:
The Principal Commissioner confirmed the demand for service tax under "renting of immovable property" services, asserting that the Appellant provided interconnected services to film distributors, including renting the theatre, managing theatre operations, and providing equipment for screening films. The Department's view was that the Appellant was essentially renting out its theatre for film exhibition, making it liable for service tax under section 65(105)(zzzz) of the Finance Act 1994 and section 66E(a) post-July 1, 2012.

However, the Appellant contended that it was not providing "renting of immovable property" services. The agreements indicated that the Appellant obtained theatrical exhibition rights from the distributors and shared a percentage of the Net Box Office Collection (NBOC) with them. The theatre was used by the Appellant itself to screen films, not by the distributors. The Tribunal agreed with the Appellant, noting that the agreements showed the Appellant paying the distributors for theatrical rights, indicating the flow of service and consideration. Therefore, no service tax could be levied on the Appellant for renting immovable property. The Tribunal referenced a similar case, Moti Talkies vs. Commissioner of Service Tax, where it was held that no service tax was justified as the distributors did not make any payment to the exhibitor.

2. Liability for Service Tax on "Miscellaneous Receipts" and "License Fee":
The Principal Commissioner also confirmed the demand for service tax on amounts received under "miscellaneous receipts" and "license fee" from the Snack Bar, categorizing it under "renting of immovable property" services. The Appellant argued that these amounts were below the threshold exemption of ?10,00,000 provided in the notification dated June 20, 2012, and thus not liable for service tax.

The Tribunal found that the confirmation of the demand for ?36,000 received from M/s. Storage and General Services Pvt. Ltd., which ran a snack bar, was indeed below the threshold exemption and hence not taxable. Additionally, the income from "Shots and Slides Hire" was for exhibiting advertisement films and slides, which fell under the negative list post-July 1, 2012, and was not taxable even before this date as it did not constitute "renting of immovable property" services. The interest income shown by the Appellant was from bank deposits and not related to renting services.

3. Extended Period of Limitation:
The Appellant argued that the extended period of limitation could not be invoked, making the demand till March 2012 time-barred. The Tribunal did not specifically address this issue in detail but set aside the entire demand based on the substantive findings on the nature of services provided.

Conclusion:
The Tribunal concluded that the Appellant did not provide "renting of immovable property" services to the film distributors and was not liable for service tax on the amounts received under "miscellaneous receipts" and "license fee" from the Snack Bar. The impugned order dated January 25, 2016, was set aside, and the appeal was allowed.