No Service Tax leviable on Revenue Shared between Exhibitor and Film Distributor: Supreme Court [Read Order]

The Supreme Court recently held that revenue sharing agreements between movie theatre owners ( exhibitors ) and film distributors are not exigible to Service Tax as business support services.

The case centred on whether these agreements could be classified as taxable "Business Support Services".

The crux of the dispute revolved around the nature of the services provided by exhibitors. The government argued that showcasing films constituted a service rendered by exhibitors to distributors. AB Motions, on the other hand, countered that their role was simply to provide the physical location, the theatre.

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It was highlighted that both parties shared the financial risks and rewards associated with ticket sales, indicating a collaborative venture rather than a service-based relationship.

K.M. Nataraj, A.S.G. appeared along with AOR Mukesh Kumar Maroria, B. Sunita Rao, Sharath Nambiar, Pratyush Srivastava, Vatsal Joshi, Satvika Thakur and Padmesh Mishra for the petitioner- Commissioner of Central Excise and Service Tax Ludhiana.

The Assessee-AB Motions Private Limited was represented by Tarun Gulati, Preeti Goel, Anubhav Goel, Siddhartha Jain, Priyanka Dhyani and AOR Sunil Kumar Sharma.

The Supreme Court, citing a precedent set in Commissioner of Service Tax v. Inox Leisure Ltd., dismissed the revenue appeal. The court's decision hinged on the distinction between simply offering a venue and providing an additional service. Importantly, the assessee established that a revenue sharing agreement, in itself, doesn't automatically translate to a taxable service.

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This distinction holds significant weight for the film industry, ensuring that revenue sharing agreements for film screenings remain exempt from service tax in India.

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The Supreme Court Two-Judge Bench of Justice B R Gavai and Justice Sandeep Mehta held that, “In view of order passed by the Coordinate Bench of this Court in C.A. No. 1335 of 2022 titled as “Commissioner of Service Tax Vs. Inox Leisure Ltd.”, this appeal is disposed of”.

To Read the full text of the Order CLICK HERE

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