2023 (1) TMI 108 - AT - Service Tax

Tribunal upholds decision: Revenue-sharing in joint ventures not taxable under Finance Act

Commissioner of Service Tax, New Delhi Versus M/s. Wave Infratech Pvt. Ltd.

Commissioner of Service Tax, New Delhi Versus M/s. Wave Infratech Pvt. Ltd. - TMI Issues Involved:1. Income from Exhibition of Movies2. Parking and Miscellaneous Income3. Income from AdvertisementDetailed Analysis:1. Income from Exhibition of Movies:The primary issue was whether the income from the exhibition of movies should be classified under 'Renting of Immovable Property Services' as per Section 65(105)(zzzz) of the Finance Act, 1994. The department alleged that the respondent was lending the theatre to film distributors for depicting films and providing interconnected services, predominantly 'renting of immovable property.' The Principal Commissioner, however, concluded that the arrangement between the respondent and the distributors was a joint venture based on revenue sharing. The agreements showed that the respondent retained a fixed gross revenue from ticket sales and paid the balance to the distributor. The Tribunal supported this view, citing previous judgments, including Moti Talkies and Inox Leisure Ltd., which established that such revenue-sharing agreements do not constitute 'renting of immovable property' since there was no consideration flowing from the distributors to the respondent.2. Parking and Miscellaneous Income:The show cause notice included demands for service tax on income from parking tickets, transfer charges, and miscellaneous income, classifying them under 'Renting of Immovable Property Services.' However, the Principal Commissioner noted that these incomes were related to operations in Kaushambi and Lucknow, where the Commissioner of Service Tax, Delhi, had no jurisdiction. Consequently, the service tax liability on these charges was dropped.3. Income from Advertisement:The department also demanded service tax on income from advertisements, signages, hoardings, and slide income, categorizing them under 'Advertising Agency Services' as per Section 65(105)(e) of the Finance Act. The Principal Commissioner accepted the respondent's contention that they had already discharged the due service tax on these amounts. The Tribunal upheld this finding, noting that the respondent had provided sufficient evidence of tax payment.Jurisdiction and Time Limitation:The Principal Commissioner found that the show cause notice issued by the Commissioner of Service Tax, Delhi, was not valid for operations in Kaushambi and Lucknow due to jurisdiction issues. Moreover, the demand for the period from 01.04.2008 to 30.09.2008 was beyond the five-year limitation period and was thus unsustainable.Security Deposit:The Principal Commissioner ruled that the security deposit received by the respondent, being refundable, could not be subjected to service tax as it did not relate to the provision of any service.Circulars and Legal Precedents:The Tribunal referenced Circulars dated 23.02.2009 and 13.12.2011, which clarified that revenue-sharing arrangements do not attract service tax. The Tribunal also cited several precedents, including Golcha Properties and Moti Talkies, which consistently held that revenue-sharing agreements between exhibitors and distributors do not constitute 'renting of immovable property.'Conclusion:The Tribunal dismissed the department's appeal, affirming the Principal Commissioner's decision to drop the show cause notice. The Tribunal reiterated that revenue-sharing arrangements do not imply a service provider-recipient relationship, and thus, no service tax is leviable in such cases. The Tribunal's decision was in line with previous judgments and upheld the legal position that joint ventures based on revenue sharing do not constitute taxable services under the Finance Act.