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ST - Respondent cannot be called as pure agent so as to exclude reimbursable expenses: CESTAT

By TIOL News Service

MUMBAI, JULY 28, 2017: THIS is a Revenue appeal.

The respondent entered into agreement with M/s Sanvedana Entertainment dated 01.01.2007for producing programme titled 'ADHURIEKKAHANI' and similar agreement dated 08.08.2005 with M/s Percept Picture Company Limited, Mumbai for producing of programme namely 'HARE KANCH KI CHOODIYA' and also gave the right and transferred the ownership of copyrights to M/s Sanvedana Entertainment and M/s Percept Picture Company Limited.

The respondent collected expenses claimed as reimbursements but opined that the same is not taxable since they had sold copyright to M/s Sanvedana Entertainment and M/s Percept Picture Company Limited.

A demand notice for recovery of service Tax came to be issued under the head 'T.V. and Radio Programme Production Service'.

The adjudicating authority dropped the demand on the sole ground that the respondent is a pure agent of M/s Percept Picture Company Limited and M/s Sanvedana Entertainment and, therefore, the amounts collected by the respondent towards the expenses for producing the programme is reimbursable and not liable for inclusion in the value of taxable services as per Rule 5(2) of ST Determination of Value Rules, 2006.

After considering the submissions made by both sides, the Bench observed –

"3. … We do not agree with the finding of the adjudicating authority for the reason that the respondent sold the programme and having transferred the ownership of copyrights to M/s Sanvedana Entertainment and M/s Percept Picture Company Limited for producing the programmes, the amount required from both these producers is for producing the programme for their own and not on behalf of the M/s Sanvedana Entertainment and M/s Percept Picture Company Limited. We are not satisfied that the respondent is a pure agent. The Revenue's ground that the discussion about provision of pure agent and reimbursable expenditure, we find that the respondent does not fulfill the condition to qualify that he is a pure agent. In the present case the respondent after producing the programme on their own transferred the copyright in the said programme to M/s Sanvedana Entertainment and M/s Percept Picture Company Limited. Accordingly the respondent was not appointed as a pure agent to incur the expenses on behalf of the M/s Sanvedana Entertainment and M/s Percept Picture Company Limited. Since the learned Commissioner decided whole case on the aspect of pure agent he did not address any other issue such as whether the respondent's service falls under the head of 'T.V. and Radio Programme Production Service' falling the programme under clause (zzu) of sub section (105) of Section 65 of the Finance Act, 1994, where the claim of the respondent that the services at all is considered as a sale of copyright permanently and whether in the such situation it is intellectual property of copyright, therefore the matter needs to be reconsidered…"

The Revenue's appeal was allowed by way of remand to the adjudicating authority.

(See 2017-TIOL-2646-CESTAT-MUM)


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