Ashish (Article Assistant (Completed)) (40 Points)
23 April 2011One of our client provides the service of allowing the advertisements to be run in the theaters. Whether the tariff / fees received by the client is subject to service tax or is there any exemption notification relating to such temprory transfer of rights of advertising?
Thanks in advance.
Pankaj Arora
(Learner)
(3134 Points)
Replied 23 April 2011
Scope of Service Tax on Copyright proposed
Licensing or exploitation of other Intellectual property rights was within the ambit of service tax since 2004.However Copyright was a notable exclusion till the now proposed amendment in the service tax law which levies service tax on
a) Sound recordings and;
b) Cinematographic works
Thus the other copyright works like musical literary, dramatic and artistic works are still out of the scope of service tax. In this connection it is worthwhile to mention that computer software code falls within the ambit of literary work and is a separate service on which service tax is already levied.
The Law always adopted a grandfatherly benign approach towards the owners of Copyrights since traditionally this class was comprised of artists and musicians having a low income and generally focusing on their creative pursuits to the detriment of pecuniary advancement.
This was evident from the following legal provisions:
a) Under section 62 of the Copyright Act 1957 the jurisdiction of the plaintiff was to be adopted for a suit unlike the general rule prescribed by the Code of Civil Procedure 1908, that the jurisdiction of the defendant was the jurisdiction for the suit. (Until the Trademarks Act 1999 was introduced and section 134 thereof prescribed the plaintiff’s jurisdiction as that for a suit of infringement, this remained the only exception for many years to the rule prescribed the CPC)
b) Stamp duty/VAT was not levied or levied at a low rate of assignment of Copyright until recently
c) Copyright exploitation and licensing was not a taxable service until the proposed amendment in the Finance Bill 2010
However in the present day materialistic world where the likes of J K Rowling have become billionaires on the strength of Copyright and related royalties alone, such preferential benign treatment is not justified and hence the laws are being gradually amended to remove such discrimination to the authors and owners of Copyright.
However in the service tax law such dilution has been done in a phased manner so as to charge only
a)Income from the exploitation of sound recordings and cinematographic films
b) income from any temporary assignment of copyrights
Thus permanent assignments/transfers of copyright are not covered within the ambit of service tax (but may attract VAT under the various VAT laws). However given the propensity of the authorities to try and bring to tax every receipt, it is recommended that these assignments/transfers of a permanent nature be accompanied by robust documentation so that the onus of roof is on the authorities seeking to tax such income from transfer to prove that the transfer assignment is not of a permanent nature
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