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TMI Blog2023 (1) TMI 108X X X X Extracts X X X X X X X X Extracts X X X X ..... that the respondent was engaged in lending the theatre to the film distributors/sub-distributors for depicting the films, whose copyrights were retained by the distributors. The show cause notice also alleged that the exhibitor was providing various elements of inter-connected services with predominance of the service of 'renting of immovable property' to the distributor and such a service of 'renting of immovable property' provided by the appellant would be classifiable under section 65(90a) of the Finance Act 1994 [the Finance Act] and taxable under section 65(105)(zzzz) of the Finance Act upto 30.06.2012 and as a declared service w.e.f. 01.07.2012. The relevant portion of the show cause notice is reproduced below: "16. Whereas it appears that the various services namely Renting of Immovable Property Service, Business Support Service, Business Auxiliary service and Man Power Supply Service are naturally bundled in the ordinary course of business, in the case of the party, as for running the show, these services are necessary elements and integral constituents of renting of the theatre. Therefore, it appears that in running the show and to screen the film owned by the Distributo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... out deducting the distributor's share, taxable under the category of "Renting of Immovable Property". Rs.19,03,69,704 Renting of Immovable Property Services Section 65(105)(zzzz) PARKING AND MISCELLANEOUS INCOME Demand on consideration received with regard to sale of parking tickets, transfer charges and miscellaneous income. Rs.61,68,748 Renting of Immovable Property Services Section 65(105)(zzzz) Income From Advertisement Demand on consideration received with regard to advertisement, signages and hoarding and Slide income Rs.1,25,50,465 Advertising Agency Services Section 65(105)(e) Total Rs.20,90,88,917 6. The Principal Commissioner noticed that the respondent had operations are three different locations namely Raja Garden at Delhi, Kaushambi and Lucknow, but for each of these locations the respondent had separate service tax registrations and had also filed returns separately for each location. The show cause notice had been issued by the Commissioner of Service Tax, Delhi who had no jurisdiction owner Lucknow and Kaushambi. The Principal Commissioner, therefore, found that the demand made in the show cause notice demanding duty relating to the rev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s inasmuch as that the Board's referred Circular dated 13.12.2011 clearly brought out in no unambiguous terms while inviting attention to the explanation to Section 65 of the Finance, 1994 [wherein it had been mentioned that "the taxable service includes any taxable service provided or to be provided by any unincorporated association or body of persons to a member thereof, for cash, deferred payment or any other valuable consideration"] that "service provided by each of the person i.e., the 'new entity'/ Theatre Owner or Exhibitor/ Distributor or Sub-Distributor or Area Distributor or Producer etc., as the case may be, is liable to Service Tax under applicable service head in an arrangement under unincorporated partnership/joint/ collaboration basis". Hence, in view of Board's Circular, in the present case, the arrangement between the noticee and their distributors is a 'new entity' or an 'unincorporated association' or a 'body of persons' and the service provided by the noticee to this 'new entity' (i.e., person) is taxable. Accordingly, the receipts by the noticee under revenue sharing arrangement with the film distributors is taxab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the appellant and the learned consultant appearing for the respondent have been considered. 16. According to the respondent, the viewers visit the theatre for entertainment and the consideration is paid to the respondent for the same. The distributor and the theatre owner i.e. respondent have come together on a common platform under revenue sharing arrangement. Therefore, the two have provided the service jointly to each other and are working for the mutual benefit of both the parties. Both the parties are working independently and the share of the Distributor is given by the respondent from the gross receipts from movie tickets. 17. This would be apparent from the agreement executed between the respondent and Mukta Arts which provides that out of the total revenue generated from the screening of films, the respondent would retain a fixed gross revenue and pay balance to the distributor. Further, as per the agreement, the gross revenue is to be distributed in the following ratio on weekly basis. The relevant portion of the said Agreement is reproduced below: Distributor's Share: Distributor's share@ 50% for 1st week Distributor's share@ 42.5% for 2nd week Distributo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oaching centre. Explanation 1 - For the purposes of this clause, "for use in the course or furtherance of business or commerce" includes use of immovable property as factories, office buildings, warehouses, theatres, exhibition halls and multiple-use buildings. Explanation 2 - For the removal of doubts, it is hereby declared that for the purposes of this clause "renting of immovable property" includes allowing or permitting the use of space in an immovable property, irrespective of the transfer of possession or control of the said immovable property." 14. "Taxable service", prior to 1 July 2012 under Section 65(105)(zzzz) of the Finance Act means : 65(105)(zzzz) :"any service provided or to be provided to any person, by any other person, by renting of immovable property or any other service in relation to such renting for use in the course of or for furtherance of, business or commerce. Explanation (1) xxxxxxxx Explanation (2) xxxxxxxx 15. Thus, for the appellant to be providing any taxable service to the distributor prior to 1 July 2012 it is necessary that the service provided should be by renting of immovable property or any other service in relation to such rentin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctivity which constitutes merely, - (i) A transfer of title in goods or immovable property, by way of sale, gift or in any other manner; or (ii) such transfer, delivery or supply of any goods which is deemed to be a sale within the meaning of Clause (29A) of Article 366 of the Constitution; or (iii) A transaction in money or actionable claim; (b) A provision of service by an employee to the employer in the course of or in relation to his employment; (c) Fees taken in any Court or Tribunal established under any law for the time being in force. Explanation (1) - xxxxxxxxxx Explanation (2) - xxxxxxxxxx Explanation (3) - xxxxxxxxxx 22. The relevant portion of Section 66E of the Finance Act which deals with "declared services" is as follows:- "Declared Services. 66E. The following shall constitute declared services, namely:- (a) Renting of immovable property; xxxxxxxxx 23. The position in law does not change with effect from 1 July, 2012 because even under Section 66B of the Finance Act, service tax is levied on the value of all services, other than those services specified in the negative list, provided or agreed to be provided in the taxable territory by on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ilms and held that even in such a situation no service tax can be levied. The relevant observations of the Division Bench are as follows: "11. It would be seen from the agreement that the SPE Films is a producer/distributor engaged in the business of production and distribution of films, while the appellant is an exhibitor engaged in the business of exhibition of films and owns/operates a chain of multiplex theatres under the brand name "Inox". The exhibitor decides which screens would play the motion picture, the numbers of shows, the show timings and the ticket pricing including the right to decide 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. It was further made clear in the Agreement that either of the party shall not interfere or otherwise influence any decision of the other party in respect of the conduct of its business. 12. Such an arrangement between a distributor/producer and an exhibitor of films was examined b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erfere with the impugned Order passed by the Customs, Excise and Service Tax Appellate Tribunal (for short, 'CESTAT'). The CESTAT has taken an absolutely correct view, to which we agree. Hence, the Civil Appeal stands dismissed." 22. A revenue sharing arrangement would, therefore, 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 vs. Commissioner of Customs, Central Excise & Service Tax, Goa-(Vice-Versa) [2016 (11) TMI 520- CESTAT Mumbai], M/s. Old World Hospitality Limited vs. CST, New Delhi [2017 (2) TMI 1176- CESTAT New Delhi] and Delhi International Airport P. Ltd. vs. Union of India & Ors [WP(C) 2516/2008 & CM No. 15832/2011 dated 14.02.2017]. In the present case, there is no service provider or service recipient relationship. The contention advanced by the learned authorised representative for the department cannot be accepted. 23. In view of the aforesaid discussion, it has to be held that no illegality was committed by the Principal Commissioner in discharging the show cause notice. The appeal is, accordingly, dismissed. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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