9911796707
TMI Blog2022 (3) TMI 1166X X X X Extracts X X X X X X X X Extracts X X X X ..... lant as per the agreed percentage of box office collection. Such percentage varies from distributor to distributor, movie to movie and week to week after the release date. 3. The Department issued a show cause notice dated 29.09.2014 proposing to recover service tax demand of Rs. 40,41,21,978/- along with the applicable interest and penalty for the period 01.04.2009 to 31.03.2014. It was alleged that the agreement between the appellant and the distributors created an Association of Persons so as to undertake jointly the activities of screening of the films. The appellant, it was further stated, had provided services to the Association of Persons which appeared to be classifiable under "support services of business or commerce" [BSS ]. 4. The appellant filed a reply to the show cause notice but the demand was ultimately confirmed by the Commissioner by order dated February 06, 2015. The Commissioner noted that the bone of contention was whether the arrangement between the appellant and the distributors would lead to constitution of an Association of Persons or whether the same has to be treated on principal to principal basis. After placing reliance upon the judgment o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nbsp;"47. The definition of Business Support Services as it stood even prior to its amendment sought to include all services which were in the nature of assistance provided for the running of a business or commercial enterprise. As discussed, certain specific services rendered by the notice find mention in the definition itself. Even those services which may not find mention in the definition, but are rendered by the notice during the course of the business of exhibiting a film, would be covered by the main definition of Business Support Services. This is because by conducting themselves in the given manner the notice provides support to the business or commerce of the AOP in the aforesaid manner to administer and operationalize the successful run of the exhibited film. The main part of the definition has remained unaltered and existed ever since its introduction and stands satisfied for all relevant period. 48. In light of the above discussions, I hold that the bouquet of services rendered by the notice to the Association of Persons would fall under the category of Business Support Services, both prior to, and after, its amendment." 6. Shri Gopal Mundhra assisted by Ms. G ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bligations; (vi) The Commissioner failed to appreciate that the essential parameters laid down for existence of a joint venture are (a) joint ownership and control, (b) sharing profits and losses, (c) salaries commonly and jointly fixed, and (d) community of interest and intention. A joint venture or association of persons cannot be said to be constituted / created in the absence of such parameters. In support of this contention, reliance has been placed on the following decisions of the Supreme Court: (a) G. Murgugesan and Brothers vs. Commissioner of Income-Tax, Madras [1973 (2) TMI 1- Supreme Court]; and (b) Faqir Chand Gulati vs. Uppal Agencies Pvt. Ltd. [2008 (7) TMI 159- Supreme Court]; and (vii) No service, much less a service in the nature of BSS was provided by the appellant. 7. Shri Nitin M. Tagde, learned authorised representative appearing for the Department has, however, supported the impugned and contended: (i) The appellant is not justified in asserting that the issue involved in this appeal stands decided in favour of the appellant in view of the earlier decisions of the Tribunal since these decisions are not in the con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t to refer to the relevant clauses of one of the Agreement dated 03.12.2010 [the Agreement] entered into between PVR Pictures Limited and the appellant and they are as follows: " PVR PICTURES LIMITED Agreement M/s: Fun Multiplex Pvt Ltd. Screening AT Terms of Screening Movie Name Action Replay Fun Cinemas, Bhopal Theatre Share for_show per week subject to minimum distributor's share will be Booking Through Fun 50.00% Toward's Distributor's share in the First week of the Net Collection PERIOD OF RUN Perpetual 42.50% Toward's Distributor's share in the Second week of the Net Collection SCREENING DATE 5th Nov 2010 Simultaneously with All India release 37.50% Toward's Distributor's share in the Third week of the Net Collection ALL INDIA RELEASE 5th Nov 2010 30.00% Toward's Distributor's share in the Fourth week & onwards till 6 months of the Net Collection Advance to be paid prior to release date 30.00% Toward's Distributor's sharre after 6 months & onwards TERMS & CONDITIONS Licensed Rights: The Distributor hereby gra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ide on a week to week basis, whether or not to continue to exhibit the motion picture. The distributor/producer had granted the exhibitor the non exclusive license to exploit the theatrical rights of a motion picture and each party was entitled to conduct its business in its absolute and sole discretion. 14. Such an arrangement between a distributor/producer and an exhibitor of films was examined by a Division Bench of the Tribunal in Moti Talkies. The Department alleged that the agreement was for 'renting of immovable property' as defined under section 65(90a) of the Finance Act. This contention was not accepted by the Tribunal and it was observed that the appellant did not provide any service to the distributors nor the distributors made any payments to the appellant as consideration for the alleged service. In fact, it was the appellant who had paid money to the distributors for the screening rights conferred upon the appellant. The observations of the Bench are as follows: "11. It is more than apparent from a bare perusal of the aforesaid agreements that they have been entered into between the appellant as an exhibitor and the distributors for screening of the films on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... This issue had come up for consideration before a Division Bench of the Tribunal in PVS Multiplex India. The Bench observed that as the appellant was screening films on revenue sharing basis, the appellant was not liable to pay service tax on the payments made to the distributors for screening the films. "7. Having considered contentions and on perusal of the facts on record, we are satisfied that there is no dispute of fact that the appellant have been screening films in their multiplex on Revenue Sharing basis, which is undisputed finding recorded by the ld. Commissioner in the impugned order. Accordingly, we hold that the appellant is not liable to pay Service Tax for Screening of Films and payments to distributors in their theatre." (emphasis supplied) 18. This apart, a revenue sharing arrangement does not necessarily imply provision of services, unless the service provider and service recipient relationship is established. This is what was observed by the Tribunal in Mormugao Port Trust, Old World Hospitality and Delhi International Airport. 19. In Mormugao Port Trust, the Tribunal explained that public private partnerships between the Government/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erative decisions was held to be the key feature of a joint venture. The other obvious feature of a joint venture would be that the parties participate in such a venture not as independent contractors but as entrepreneurs desirous to earn profits, the extent whereof may be contingent upon the success of the venture, rather than any fixed fees or consideration for any specific services. 17 The question that arises for consideration is whether the activity undertaken by a co- venture (partner) for the furtherance of the joint venture (partnership) can be said to be a service rendered by such co-venturer (partner) to the Joint Venture (Partnership). In our view, the answer to this question has to be in the negative inasmuch as whatever the partner does for the furtherance of the business of the partnership, he does so only for advancing his own interest as he has a stake in the success of the venture. There is neither an intention to render a service to the other partners nor is there any consideration fixed as a quid pro quo for any particular service of a partner. All the resources and contribution of a partner enter into a common pool of resource required for running the joint en ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the theatre owner screens/exhibits a movie that has been provided by the distributor. Such an exhibition is not a support or assistance activity but is an activity on its own accord. That being the case such an activity cannot fall under 'Business Support Service'. 3. In the light of above, it is clarified that screening of a movie is not a taxable service except where the distributor leases out the theater and the theater owner get a fixed rent. In such case, the service provided by the theater owner would be categorized as 'Renting of immovable property for furtherance of business or commerce' and the theater owner would be liable to pay tax on the rent received from the distributor. The facts of each case and the terms of contract must be examined before a view is taken. 4. All pending cases may be disposed of accordingly. In case any difficulty is faced in implementing these instructions, the same may be brought to the notice of the undersigned." (emphasis supplied) 22. The subsequent Circular dated 13.12.2011 issued by the Central Board of Excise and Customs, apart from the fact that it would not be applicable for con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d as 'Association of Persons' (AOP), which may lead to the notice getting an advantage in defending their case when they prefer an appeal before the Hon'ble CESTAT, due to excessive emphasis on this aspect by Adjudicating Authority rather than deciding other 'Exhibitor' agreement between distributions of four cinemas. It is felt that the service provided by the notice is classifiable under Business Support Service (as principal to principal basis and not as AOP) as the exhibitors apart from letting out their premises is also providing other support services for the business of the distributor for the purpose of exhibiting the film for which there is an agreement to share profits. In fact there could be a loss to the exhibitor after paying rent and expenses of theatre exhibition which is not shared. This will have the effect of a charge of Service Tax on the gross collections on the sale of tickets in a revenue sharing model, as opposed to other arrangements, commonly prevalent in the industry, where the tax would apply only on a part of the ticket collections represented in the form of either a charge for the temporary transfer ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
