2024 (10) TMI 627 - AT - Service Tax

Taxability - Business Support Services - share of collections received by the cinema owners - HELD THAT - Movies are made by producers investing money and the producer acquires the copy right to the movies which, he then transfers to various distributors across the country for a consideration. The distributors, in turn, enter into agreements with various cinema/ theater owners and provide license/ right to screen the movie in their theaters. The Net Box Office collections, i.e. the proceeds of sales of tickets minus some expenses such as taxes are shared between the cinema owners and the distributors. The question as to whether the share of collections received by the cinema owners can be taxed has been decided in negative by this Tribunal in INOX LEISURE LTD. VERSUS COMMISSIONER OF SERVICE TAX, HYDERABAD 2021 (10) TMI 893 - CESTAT HYDERABAD where it was held that ' There is nothing on record to show that there is an agreement to share profits and losses. Only the collections are shared after some deductions. If, for instance, the total expenses incurred by the appellant in running the theatre is much more than its collections from the movie, it will incur losses. The distributor has no responsibility to share the losses. The distributor gets its share of the net Box Office collections even though the collections may be small. Hence the nature of the agreement here is one in which the distributor gives permission to screen the movies and gets a consideration. The quantum of consideration is not a fixed amount but a share of collections. The distributor does not assume any business risks in screening the movies. Therefore, we find no evidence whatsoever in this arrangement of forming an unincorporated joint venture.' Since the Tribunal has already taken a view on this issue, there is no occasion to take a different view in this appeal which is on the self-same issue and is extension of the earlier proceedings. The Order-in-Appeal is upheld and the appeal filed by the Revenue is dismissed.

Summary

Issues:
1. Appeal against Order-in-Appeal No.GZB/EXCUS/000/APPL-MRT/194/2019-20 dated 11.10.2019.
2. Confirmation of demand under the category of "Business Support Services" by the Commissioner (Appeals).
3. Allegation of creation of an unincorporated joint venture and provision of business support services by the appellant.
4. Levying service tax on the cinema owner's share of Net Box Office collections.
5. Interpretation of agreements between the appellant and distributors in the context of service tax liability.

Analysis:
1. The appeal was filed by the Revenue challenging the Order-in-Appeal dated 11.10.2019 passed by the Commissioner (Appeals). The case involved M/s Five Vision Promoters Pvt. Ltd., registered for various taxable services. A Statement of Demand was issued based on a Show Cause Notice dated 30.01.2015. The Tribunal, in a previous order, set aside the demand under "Business Support Services" but upheld the demand for "Renting of Immovable Property" service. The current appeal addressed the demand of Rs.55,67,567/- under "Business Support Services," which was set aside by the Commissioner (Appeals).

2. The Tribunal analyzed the alleged creation of an unincorporated joint venture between the appellant and film distributors. The appellant's role as a theatre owner and exhibitor was crucial. The agreements were for temporary transfer of copyrights for film exhibition, not for joint ventures. The Tribunal considered factors indicating a joint venture, concluding that no joint venture existed. The Tribunal also addressed the issue of service tax on the cinema owner's share of Net Box Office collections, citing precedents where such amounts were held non-taxable.

3. The Tribunal emphasized that no express or implied agreement existed to form a joint venture. The distributors leased temporary rights to the appellant, who had full control over film screening. The agreement focused on permission to screen movies in exchange for a share of collections, with no profit-sharing or assumption of business risks by distributors. The nature of the arrangement did not indicate the formation of an unincorporated joint venture.

4. Given the Tribunal's previous rulings and analysis of the current appeal, the Order-in-Appeal dated 11.10.2019 was upheld, and the Revenue's appeal was dismissed for lacking merit. The decision reiterated the non-taxability of cinema owners' share of Net Box Office collections and the absence of evidence supporting the existence of an unincorporated joint venture between the appellant and distributors.