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Issues: Whether the appellant's arrangement with film distributors for screening films in its theatre amounted to "Renting of Immovable Property" so as to attract service tax, or whether the transaction was a licence/transfer of theatrical exhibition rights taxable, if at all, in the hands of the distributor under copyright service.
Analysis: The agreement showed that the distributor granted theatrical exhibition rights to the appellant, while the appellant paid the distributor theatre hire, fixed hire, or a share of net box office collection for the right to screen the film. On the settled line of Tribunal decisions, a revenue-sharing or hire-based arrangement for exhibition of films does not by itself establish a service-provider and service-recipient relationship in favour of the distributor. The essential element of consideration for a taxable service from the appellant to the distributor was absent. The statutory and circular framework also supported taxation of temporary transfer or permitting use of copyright, including cinematograph films for exhibition, in the hands of the distributor rather than treating the theatre owner's screening activity as renting of immovable property. The departmental view that all services could be clubbed under renting was therefore unsustainable.
Conclusion: The appellant's activity was not "Renting of Immovable Property" and no service tax was leviable on the appellant on that basis; the demand against the appellant failed.
Ratio Decidendi: Where a theatre owner pays the distributor for exhibition rights and no consideration flows from the distributor to the theatre owner, the arrangement is not a taxable renting service by the theatre owner, and the service tax liability, if any, lies on the distributor for temporary transfer of copyright.
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