TaxTMI 
TaxTMI 
2023 (1) TMI 390
X X X X Extracts X X X X
X X X X Extracts X X X X
....s involved in exhibition of cinematographic films, in an arrangement by which several distributors participate in sharing of revenue with the appellant. The tax authorities concluded that these are distinct entities rendering service in de-mutualized capacity on 'principal-to-principal' basis and do not acquire status of partners in consequence of their agreement. Tax liability of Rs. 15,66,91,993/- on value of Rs. 1,89,59,12,990/- for the period from 2014-15 and up to September 2015 in 2015-16 was ordered for recovery under section 73 of Finance Act, 1994, along with appropriate interest under section 75 of Finance Act, 1994, besides being imposed with penalties under section 76 and 77 of Finance Act, 1994 leading to this appeal before us.....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... done by the distributor. Under this arrangement, the fixed amount contracted is given to the theater owner by the distributor irrespective of the fact whether the movie runs well or not. However, there is no rental arrangement between the theater owner and the distributor as in the arrangement at paragraph 2.1 above. A view has been expressed that in this arrangement, the theater owner provides 'Business Support Service' to the distributor and hence is liable to pay service tax on the fixed amount received by the theater owner. 2.5. The matter has been examined. By definition 'Business Support Service' is a generic service of providing 'support to the business or commerce of the service receiver'. In other words the principal activity i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....istributor enters into an arrangement with the exhibitor or theatre owner, with the understanding to share revenue/profits and not provide the service on principal-to-principal basis, a new entity emerges, distinct from its constituents. As the new entity acquires the character of a "person", the transactions between it and the other independent entities namely the distributor/sub-distributor / area distributor and the exhibitor etc will be a taxable service. Whereas, in cases the character of a "person" is not acquired in the business transaction and the transaction is as on principal-to-principal basis, the tax is leviable on either of the constituent members based on the nature of the transaction and as per rules of classification of ser....