Service tax on film producers, Service Tax

[kamal mall]

Dear Sir,

Our Client is a Film producer. It done two type of transactions 1. sold his movier under work in progress to another producer and take 50 lacs lump sum from him. Whether it is taxable transaction? 2. It done a movie and sold their satalight right, Video right and exhibition right to various parties. Whether it is taxable transaction? Pls mention section for reference.

Posts / Replies

[Akash Deep]

Dear Sir,

The questions itself has been asked in wrong terms. in a movie, what is material is not the physical property like film role but the content of movie. the intellectual property imbibed on film role is the material thing. So when some body talk about purchasing or selling a movie, he is not referring to the cost of film role but the skill and labour employed by directors actors and other persons involved in movie making. here also producer has not sold the movie but transferred intellectual property contained in film role. the intellectual property in a movie( more precise cinematographic work) is known as copy right. your client producer is transferring the copy right and not selling movie as such.

Copyright can be transferred by two ways. one is assignment and other is licensing. Assignment of copy right may be treated as some what like to sale of goods where after sale seller has not control over goods. licensing is like giving goods on rent for use, where the ownership of goods still remain with owner but the other person become eligible to use goods for agreed purpose and for agreed time.

As copyright is a bundle of rights, some times copyright holders do not want to transfer all of the rights but some rights only. (for example author of a story may give right to make audio of it while reserving the right to make movies.) in such cases licensing of copy right is preferable over assignment of copy right.

It is well settled that copy right is goods. so when you transfer copyright by way of assignment, which means copyright holder got no control over the copyright transferred and it becomes the sole property of transferee. Assignment of copy right is like sale of goods, which out of the scope of service tax.

so if your client producer has transferred copyright in absolute terms( transferred by way of assignment) such transaction is out of scope of service tax.

however, if he has only licensed it, it will a service. however temporary transfer of copy right or permitting use of copyright of cinematographic films for exhibition in cinema halls is exempted under 25/2012 dated 20.6.2012.

hope this will help you in understanding the query in correct manner.