AI Structured Summary
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Judgment
,,,,
The Appellant, an owner of a cinema hall called ‘Golcha Cinema’ and engaged in the business of exhibiting films in this theatre, has assailed",,,,
the order dated January 25, 2016 passed by the Principal Commissioner of Service Tax, Delhi, [the Principal Commissioner] that confirms the demand",,,,
of service tax under “renting of immovable property†service with penalty and interest proposed in the two show cause notices dated April 17,",,,,
2014 and April 22, 2015 for the reason that the Appellant is providing service to the film Distributors by way of renting its theatre for screening the",,,,
films.,,,,
The 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. It is in exercise of such rights obtained from the",,,,
Distributors that the Appellant exhibited movies in its theatre. In lieu of obtaining such rights, the Appellant agreed to share a specified percentage of",,,,
Net Box Office Collection with the Distributors, subject to the conditions specified in the agreements. In one such agreement dated August 29, 2012",,,,
entered into between M/s. A.A. Films and the Appellant, the Appellant agreed to share 50%/40% of the Net Box Office Collection, with M/s. A.A.",,,,
Films subject to a maximum theatre share of Rs.2,80,000/-.",,,,
The Department, however believed that the Appellant was providing various elements of inter connected services to the Distributors, such as",,,,
renting/ letting/ leasing of theatre for exhibition of films; manpower to manage the theatre operations, provision of projector and other related",,,,
equipment to screen the films; arranging of power supply and providing arrangements to collect the box office collections. According to the,,,,
Department, the essential character of the bundle of services provided by the Appellant was in the nature of “renting of immovable propertyâ€",,,,
service which would be taxable under section 65(105) (zzzz) of the Finance Act 1994, [the Finance Act] for the period up to June 30, 2012 and under",,,,
section 66E(a) of the Finance Act read with section 66F(3)(b) of the Finance Act for the period from July 1, 2012 to March 31, 2014. The view of the",,,,
Department was that copy rights of movies/ films were not transferred/ sold by the film Distributors, either temporarily or otherwise, and so the",,,,
Appellant was only letting out its premises for exhibition of films to the Distributors.,,,,
The Appellant filed replies to the two show cause notices but the Principal Commissioner, by the impugned order dated January 25, 2016, confirmed",,,,
the demand for the period October 2008 to March 2014.,,,,
The impugned order holds that service tax will be leviable under the head of ‘renting of immovable property’ and the relevant portion of the,,,,
order is reproduced below:,,,,
“9.18 I therefore come to a conclusion that while allowing the use of theatre, they have also provided the facility of projection of film on",,,,
the said screen in terms of contract for which they are receiving remuneration as a share in Net Box Office Collections (NBOC). Had it been,,,,
purely Principal to Principal relationship, rightful owner of the NBOC would have been exhibitor. Had it been purely Principal to Agent",,,,
relationship, rightful owner of the NBOC would have been distributor who is owning the copyright of the film.",,,,
9.19 However, this situation is a mix of both and hence instead of a fixed rent, interest in net box office collection by way of sharing it after",,,,
certain extent as defined in the agreement is being paid instead of a fixed rent, so as to promote business and protect their respective",,,,
interest. The noticee, therefore, appears performing dual activities simultaneously viz. rendering taxable services to the Distributors on one",,,,
hand and entertainment to the clients on other hand. Whereas they were paying tax for entertainment; they failed to pay tax on the services,,,,
provided where they provided services to the Distributors in screening their films and in return the noticee received charges termed by them,,,,
as Box Office collection share. The terms of contract also substantiate my findings.,,,,
9.20 In view of above, the noticee’s plan that there is no provision of service and hence no service tax liability is found baseless and",,,,
thus their activities are rendered liable to service tax under the major head ‘Renting of Immovable Property’, which is taxable under",,,,
erstwhile Section 65 (105) (zzzz) of the Act ibid upto 30.06.2012. Further the service provided by the noticee to the Distributors remained,,,,
taxable under clause (a) of Section 66E of the Act ibid as “Declared Services†and is not covered in the negative list as provided under,,,,
Section 66D of the Act after introduction of negative services regime w.e.f. 01.07.2012.â€,,,,
The impugned order has also confirmed the demand for income under the heads “miscellaneous receiptâ€, “car parking higherâ€, “shots",,,,
and slides†and “rent receipt†shown in the balance sheet.,,,,
Shri B.L.Narasimhan learned counsel appearing for the Appellant has made the following submissions:,,,,
(i) The Appellant is not providing ‘renting of immovable property’ services to the Distributors. 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. In the instant case, the immovable property i.e. the theatre is used",,,,
and occupied by the Appellant in its own right to screen the film and at no point of time, the theatre is used by the Distributor;",,,,
(ii) A bare perusal of the agreements between the Appellant and the Distributors would make it abundantly clear that it is the Appellant who is making,,,,
payments to the Distributors for grant of theatrical rights, which indicates both, the flow of service and consideration. Hence, no service tax can be",,,,
levied on the Appellant, in absence of either a consideration or a service. In support of this submission, reliance has been placed on a recent decision",,,,
of the Tribunal in Moti Talkies vs. Commissioner of Service Tax, Delhi-I, 2020(6) TMI 87- CESTAT New Delhi;",,,,
(iii) The agreements between the Appellant and the Distributors is on a revenue sharing basis and hence, no service tax is leviable;",,,,
(iv) The Appellant is not providing any service to the Distributors;,,,,
(v) Income under the heads ‘Miscellaneous Receipts’, ‘Car Parking Hire’, ‘Shorts and Slides’ and ‘Rent Received’ shown",,,,
in the balance sheet are not leviable to service tax; and,,,,
(vi) The extended period of limitation could not have been invoked in the present case. Hence, the demand till March 2012 is time barred.",,,,
Shri Vivek Pandey, learned Authorised Representative of the Department has however, supported the impugned order and made the following",,,,
submissions:,,,,
(i) As per CBIC Circular dated February 23, 2009, one type of arrangement prevalent between the theatre owner and the Distributor is that the",,,,
theatre owner leases out the hall for screening of the movie to the Distributor and this kind of arrangement is taxable under ‘renting of immovable,,,,
property’ service;,,,,
CIRCUIT: DELHI-UP
EXHIBITOR/CONTROLLERM:R
N.R SAINI
THEATRE NAME& LOCATION:
GOLCHA CINEMA DELHI
ADVANCE: Rs/-
FORMAT: PRINT","Run:1st
Week: 2
Wks
Shows: 4
shows daily","FILM:STUDENT OFT HE YEAR in Hindi
Language
RELEASE DATE: 19O CT 2012(Subject to
simultaneous all India release)
DISTRIBUTOR’SS HARE: Minimum
Distributor’s Share 50%, 40% of
NBOC for 2 week respectively, Subject to
Exhibitor Maximum Theatre share
Rs.280000 (Rs. Two Eighty Thousands
only) for 28 effective shows in a week.
(Terms of Theatre share or percentage (%)
whichever beneficial to the distributor)",,
Net Collection for India
territory in 6 National chains
viz. Big, PVR, Inox, Fame,
Cinemax and Fun (Benchmark
amounts)","Terms (% of NBOC towards the
Distributor Share of week 1,2,3
and 4 onward respectively)",Print clause,,
Equal to or above 24.23
crores*",52.5/45/37.5/30,None,,
Below 24.23 crores* and
above or equal to 13.85
crores*",50/42.5/37.5/30,None,,
Below 13.85 crores* and
above or equal to 6 crores*",50/40/35/30,"Prints-digital screens above
692",,
Below 6 crores*,47.5/40/37.5/30,None,,
Financial Year,"Car Parking
Hire",Rent Received,"Miscellaneous
Receipt",Shorts & Slides
,"Parking space
rendered to users
visiting the theatre","Rentals from
office space","INR Charges;
news reel charges;
show tax collection;
etc.","Advertisements
exhibited between
movies
2008-09,"No service tax leviable as aggregate turnover was below Rs.10 lakhs by virtue of
Notification No.8/2008-ST dated 01.03.2008 and amending Notification No.
06/2005-ST dated 01.03.2005 (Rs.3,21,413)",,,
2009-10,,,,
2010-11,"Not taxable by
virtue of exclusion
provided for
renting of land for
parking purposes
under Section 65
(105) (zzzz) of the
Finance Act.","No service tax leviable as aggregate turnover was below Rs.
10 lakhs by virtue of Notification No.06/2005-ST dated
01.03.2005 (Rs. 4,84,814/-, after reducing car parking
charge)",,
2011-12,,"No service tax leviable as aggregate turnover was below Rs.
10 lakhs by virtue of Notification No.06/2005-ST dated
01.03.2005 (Rs. 9,48,502/-, after reducing car parking
charge)",,
2012-13
(30.06.2012)",,,,
2012-13 (from
01.07.2012)","Exempted as per
S l. No. 24 of
Notification No.
25/2012-ST dated
20.06.2012",Service Tax Paid,"Not Taxable under
renting of
immovable property
service.","Not taxable under
renting of
immovable property
service, as it
amounts to sale of
space or time for
advertisement.
,,,,"Not taxable by
virtue of Section
66D(g) of the
Finance Act i.e.
‘selling of space
or time slots for
advertisement,
other than
advertisements
broadcast by radio
or television’.
2013-14,Service Tax paid,Service tax paid,,