2025 (4) TMI 772 - AT - Service Tax

Stadium sponsorship agreements for boxes and stands ruled non-taxable under Sale of Space and Time for Advertisement category

CESTAT Chennai allowed the appeal, holding that amounts received from sponsorship agreements for boxes and stands in stadium do not constitute taxable ... Levy of service tax - Sale of Space and Time for Advertisement - amounts received from sponsorship agreements for boxes and stands in the stadium constitute a taxable service or not - HELD THAT:- The issue stands already decided in the appellant’s favour in the appellant’s own matter by two earlier decisions of this Tribunal on which the Appellant has placed reliance. Relevant portions of this Tribunal’s decision in the case M/S. TAMILNADU CRICKET ASSOCIATION VERSUS THE COMMISSIONER OF CGST & CENTRAL EXCISE CHENNAI NORTH COMMISSIONERATE [2024 (4) TMI 471 - CESTAT CHENNAI], where it was held that 'the amount received as per sponsorship agreements for boxes and stands are not leviable to tax under Sale of Space for Advertisement and requires to be set aside.' The facts of this case are no different and a perusal of the sponsorship agreement as available in the appeal records reveal that the terms therein too are similar to that in the decision reproduced above. There is no need to multiply the authorities except to point out that the decisions cited by the counsel for the appellant all attest to similar line of reasoning. Conclusion - The sponsorship services related to sports events are not taxable under the 'Sale of Space and Time for Advertisement' category, as they do not involve the sale of advertisement space but rather the granting of sponsorship rights. The impugned order is set aside - appeal allowed. ISSUES PRESENTED and CONSIDEREDThe core legal question considered in this judgment is whether the demand raised under the category of 'Sale of Space and Time for Advertisement' on the appellant, Tamilnadu Cricket Association, is tenable in law. Specifically, the issue revolves around whether the amounts received from sponsorship agreements for boxes and stands in the stadium constitute a taxable service under the Finance Act, 1994.ISSUE-WISE DETAILED ANALYSISRelevant legal framework and precedents:The legal framework involves the interpretation of the 'Sale of Space and Time for Advertisement' as defined in sub-clause (zzzm) of Section 65(105) of the Finance Act, 1994. This provision defines the taxable service as any service provided in relation to the sale of space or time for advertisement, excluding print media and broadcasting time slots. Additionally, the definition of 'Sponsorship' under Section 65(99a) and its taxable nature under Section 65(105)(zzzn) are relevant, particularly the exclusion of sponsorship services related to sports events from taxation.Court's interpretation and reasoning:The Tribunal found that the issue had been previously decided in favor of the appellant in earlier cases involving similar facts. The Tribunal's reasoning was based on the interpretation that the agreements in question were more akin to sponsorship services rather than the sale of advertisement space. The agreements granted sponsors certain rights, such as displaying their names on boxes or stands, but did not allow for product advertisements, aligning with the definition of sponsorship, which is not taxable when related to sports events.Key evidence and findings:The Tribunal examined the sponsorship agreements, which revealed that sponsors were allowed to display their names on boxes or stands, but not their products. The agreements provided sponsors with exclusive rights to witness matches and priority booking rights, but did not constitute the sale of advertisement space. The Tribunal also considered the CBIC clarification that sponsorship services are an alternate form of advertisement and are not taxable under the reverse charge mechanism when related to sports events.Application of law to facts:Applying the legal framework to the facts, the Tribunal concluded that the activities carried out by the appellant under the sponsorship agreements did not fall under the taxable category of 'Sale of Space and Time for Advertisement.' Instead, they were sponsorship services related to sports events, which are not taxable under the Finance Act, 1994. The Tribunal relied on its previous decisions in similar cases involving the appellant, which had reached the same conclusion.Treatment of competing arguments:The appellant argued that the amounts received were for sponsorship, not advertisement, and cited previous Tribunal decisions supporting their position. The respondent, representing the Department, reiterated the findings of the appellate authority, which had upheld the demand for service tax. The Tribunal favored the appellant's arguments, finding them consistent with existing legal interpretations and precedents.Conclusions:The Tribunal concluded that the amounts received by the appellant under the sponsorship agreements were not taxable as 'Sale of Space and Time for Advertisement' services. The agreements were deemed to be sponsorship services related to sports events, which are excluded from taxation under the relevant provisions of the Finance Act, 1994.SIGNIFICANT HOLDINGSThe Tribunal's significant holdings include the reaffirmation of the principle that sponsorship agreements related to sports events do not constitute taxable services under the category of 'Sale of Space and Time for Advertisement.' The Tribunal relied on its previous decisions in similar cases, emphasizing the consistency of its reasoning.Preserve verbatim quotes of crucial legal reasoning:The Tribunal quoted its earlier decision: 'The definition of sponsorship reveals that the activity carried out by the appellant by entering such sponsorship agreements are more akin to sponsorship service which are taxable only with effect from 1.5.2006. Further, these sponsorship services are in relation to sports events and are not taxable services as laid down under section 65(105)(zzzn) of the Finance Act, 1994.'Core principles established:The core principle established is that sponsorship services related to sports events are not taxable under the 'Sale of Space and Time for Advertisement' category, as they do not involve the sale of advertisement space but rather the granting of sponsorship rights.Final determinations on each issue:The Tribunal set aside the impugned Order-in-Appeal No. 254/2015, concluding that the demand for service tax on the amounts received under the sponsorship agreements was not sustainable. The appeal was allowed with consequential relief in law, if any.