Order Date – 9 December 2022

Facts –

• The appellant, M/s All India Football Federation is the owner and controller of the rights relating to national teams competitions and matches including, but not limited to the advertising rights, broadcast rights, film rights etc. The appellant is registered with the Service Tax Department and is the governing body for football matches and competitions in the country.
• An audit was conducted of the records of M/s Zee Entertainment Enterprises Pvt. Ltd. during which it was found that a tripartite agreement was entered into between the appellant. It was found that the appellant had, an agreement with ZEEL to grant commercial rights for broadcasting for a period of 10 years. Five years after the agreement was signed a tripartite agreement was signed between the appellant, ZEEL and IMGR on 09.12.2010 by which commercial rights which were granted to ZEEL were transferred to IMGR. In consideration of this transfer, IMGR paid to ZEEL a termination fee of Rs. 70 crores on behalf of the appellant.
• It was alleged that amount paid by IMGR to ZEEL on behalf of the appellant is exigible to service tax at the hands of the appellant under the category of “granting  rights or permitting commercial use or exploitation of any event including an event relating to art, entertainment, business, sports or marriage” under section 65 (105) (zzzzr) of the Finance Act, 1994.
• A show cause notice dated 12.04.2016 was issued to the appellant calling upon it to explain why service tax amounting to Rs. 7,53,74,401/- (including cess) should not be demanded from it under section 73 invoking extending period of limitation along with interest under section 75.

Issue –

• Whether the amount paid by IMGR to ZEEL as termination fee as per tripartite agreement entered into between the appellant, ZEEL and IMGR can be taxed?

Order –

• The Tribunal finds that the rights were originally granted to ZEEL at which time they were not taxable. Had ZEEL continued to use the rights for the full 10 years no tax would have been payable. Had an agreement been reached whereby the rights were returned by ZEEL to the appellant for a consideration that could have been a consideration for termination of the original contract.
• The tripartite agreement which has been entered into has effectively circumvented this situation by transferring the rights from ZEEL to IMGR directly with the concurrence of the appellant for a consideration known as the termination fee paid by IMGR to ZEEL. The appellant has not rendered any service in this agreement, but has concurred to the agreement whereby the rights were transferred from ZEEL to IMGR.
• It also finds that such concurrence by one to the transfer of rights from A to B does not amount to rendering any service. Hence, the amount paid by IMGR to ZEEL on behalf of the appellant cannot be considered as an amount paid to the appellant for any service.
• Hence the demand is not sustainable and needs to be set aside. The appeal is allowed.