Copyright Services

In a writ petition challenging the vires of the provision of section 65(105) (zzzzt) of the Finance Act, 1994 which defines taxable service in the context of temporary transfer or permitting the use or enjoyment of any copyright as defined under the Copyright Act, 1957, the Hon’ble High Court of Madras after analysing various agreements between producers and distributors and distributors and sub-distributors/exhibitors/theatre owners held that there is only a temporary transfer of copyright or permission to use or enjoy copyright of the film for a consideration and the producer retains the effective control over the film such as the right to deal with and dispose of the rights to any third parties, right to screen the picture over the satellite channels, Doordarshan channels, etc. Such transaction would not amount to “transfer of the right to use the copyright” by the producer to the distributor or distributor to exhibitor so as to amount as “sale” within the meaning of Article 366(29A)(d). It is only the permanent transfer of copyright (by assignment or otherwise) which will not amount to rendering of service and would be excluded from the purview of service tax. Accordingly the High Court held that the temporary transfer of copyrights or the permission to use or enjoy the copyright would not fall either under Entry 54 of List II or Entry 92A of List I but is well within the legislative competence of the Parliament for levying service tax under Entry 97 of List I [AGS Entertainment Pvt. Ltd. vs. Union of India (2013) 32 STR 129 (Mad.)].