Cost-sharing for joint promotion is not sponsorship service when payments cover shared advertising expenses rather than service consideration.

Amounts contributed under a Co-Op Partner Agreement for joint gold jewellery promotion are described as shared advertising rather than consideration for sponsorship services. The arrangement required the appellant to use third-party vendors, submit invoices, and receive a 25% contribution from World Gold Council toward common media spends, with non-exclusive use of WGC marks. On that basis, the text states that the essential elements of a taxable sponsorship service were absent because there was no identifiable service provider-recipient relationship and no consideration for a service. It also notes reliance on precedent that reimbursement or cost-sharing is not taxable consideration for services, and says the sponsorship classification was rejected.

---

---

Issues: Whether the amounts received by the appellant under the Co-Op Partner Agreement with World Gold Council constitute consideration for providing sponsorship services (taxable service) or are merely reimbursement/cost sharing and hence not taxable as sponsorship.

Analysis: The agreement between the parties records a joint collaboration to promote 22 karat gold jewellery by media advertising, with WGC agreeing to contribute 25% of total media spends and a nonexclusive right granted to the appellant to use WGC marks. The departmental case rested on incorporation of the WGC logo/name in advertisements and the contractual conditions requiring conformity with WGC branding. Examination of the records shows that the appellant engaged third-party vendors for advertising and was required to submit vendor invoices for WGC to release its contribution. The arrangement reflects a shared expense structure for a joint promotional activity benefiting both parties rather than a transaction where the appellant provides a service to WGC for consideration. The statutory definitions in Section 65(99a) and Section 65(105)(zzzn) of the Finance Act, 1994 require an identifiable service provider and recipient and a consideration for the service; these elements are not satisfied where funds are contributed as a share of common expenditure. The Tribunal relied on precedent holding that reimbursement or cost-sharing of expenses is not taxable consideration for services and distinguished authorities cited by the department on facts. The appellants were not rendering sponsorship services to WGC but were jointly incurring promotional expenses, with WGC's contribution being a share of such expenses.

Conclusion: The appeal is allowed and the demand of service tax and penalty insofar as based on classification of the transaction as sponsorship service is set aside; decision is in favour of the assessee.

---