The New Delhi Customs, Excises and Service Taxes Appellate Tribunal (CESTAT) held that service tax is not applicable on income received from screening of movies for the annual film festival held by Hindustan Times.
The Appellant, Vinay Kumar is the Proprietor of M/s. Regal Theatre 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 entered into between M/s. Eros International Media and the Appellant, the Appellant agreed to share 50% of the Net Box Office Collection, subject to a maximum theatre share of Rs.1,75,000.
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 property” service which would be taxable under section 65(105) (zzzz) of the Finance Act 1994 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 copyrights of movies or 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 issue raised in this case is about the confirmation of demand on the amount of Rs. 4,04,056 shown by the Appellant under the income heads of ‘weighing machine receipts’ and ‘miscellaneous income’ in its balance sheet, under the category of renting of immovable property service, for the period 2008-09 to 2013-14.
“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 CESTAT said.
The two-member bench headed by President Justice Dilip Gupta noted that 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 the provision of any ‘renting of immovable property‘ service. It is, therefore, not liable to service tax.
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