2020 (11) TMI 436 - AT - Service Tax

Renting of immovable property service - 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 - Bundled services - period October 2008 to March 2014 - HELD THAT - 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. This issue also came up for consideration before a Division Bench of the Tribunal in M/S. MOTI TALKIES VERSUS COMMISSIONER OF SERVICE TAX, DELHI I 2020 (6) TMI 87 - CESTAT NEW DELHI . It was held that the demand of service tax under renting of immovable property service was not justified for the reason that the Appellant had not provided any service to the Distributor, nor the Distributor had made any payment to the Appellant as a consideration for the alleged service - It is, therefore, 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 service - demand under the income heads of 'weighing machine receipts and 'miscellaneous income' - period 2008-09 to 2013-14 - HELD THAT - The demand of service tax on the income head of 'weighing machine receipts is not sustainable as the said income is on account of collections from the coin box kept with the weighing machine. By inserting a coin in the coin box an individual would know the weight. This income cannot be classified as 'renting of immovable property service - The income received under the head 'miscellaneous receipts' is in connection with the screening of movies for the annual film festival held by Hindustan Times. The said income cannot also be said to be towards provision of any 'renting of immovable property' service. It is, therefore, not leviable to service tax. Appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
1. Classification of services provided by the Appellant as "renting of immovable property".
2. Applicability of service tax on income from "weighing machine receipts" and "miscellaneous income".
3. Invocation of the extended period of limitation for service tax demand.

Issue-wise Detailed Analysis:

1. Classification of Services as "Renting of Immovable Property":

The Appellant, owner of a cinema hall, entered into agreements with film distributors to exhibit movies. The Department contended that the Appellant was providing a bundle of interconnected services, primarily characterized as "renting of immovable property" under Section 65(105)(zzzz) of the Finance Act, 1994, and Section 66E(a) read with Section 66F(3)(b) for the period post-July 1, 2012. The Principal Commissioner confirmed this view, asserting that the Appellant's activities included renting the theatre, providing manpower, equipment, and other services, which collectively constituted "renting of immovable property" services.

The Appellant argued that the agreements were for obtaining theatrical rights from distributors, with payments made to distributors based on a revenue-sharing model. The Appellant contended that the theatre was used and occupied by them, not by the distributors, and thus did not fall under "renting of immovable property". The Tribunal agreed with the Appellant, noting that the agreements indicated the Appellant paid distributors for theatrical rights, and no service was provided to the distributors. The Tribunal referenced the case of Moti Talkies vs. Commissioner of Service Tax, Delhi-I, which held that no service tax was applicable as the exhibitor paid the distributor, not vice versa.

2. Applicability of Service Tax on Income from "Weighing Machine Receipts" and "Miscellaneous Income":

The Principal Commissioner had also confirmed the demand for service tax on income classified under "weighing machine receipts" and "miscellaneous income". The Appellant argued that these incomes were not from renting immovable property and were below the threshold exemption limit.

The Tribunal found that "weighing machine receipts" were from individuals using a coin-operated weighing machine, which could not be classified as "renting of immovable property". Similarly, "miscellaneous income" related to screening films for an annual festival was not from renting property. Both incomes were below the threshold exemption of ?10 lakhs as per relevant notifications, and thus not liable to service tax.

3. Invocation of Extended Period of Limitation:

The Appellant contended that the extended period of limitation should not apply, making the demand for the period till March 2012 time-barred. The Tribunal did not explicitly address this issue in detail, but the overall conclusion was that the service tax demand itself was unsustainable, rendering the limitation argument moot.

Conclusion:

The Tribunal concluded that the Appellant did not provide "renting of immovable property" services to the film distributors and that the income from "weighing machine receipts" and "miscellaneous income" was not taxable under this category. The entire service tax demand was set aside, and the appeal was allowed.