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Film Copyright Not IT Software, Rules Bombay HC
22 Sep
Summary
- Bombay High Court ruled film copyright licensing isn't IT software.
- Dharma Productions won a Rs. 12.11 crore GST dispute.
- Electronic transmission doesn't alter copyright's nature.
The Bombay High Court has delivered a significant ruling in a Goods and Services Tax (GST) dispute, granting relief to Dharma Productions. The court quashed a tax demand totaling Rs. 12.11 crores, which was levied due to the GST authorities classifying cinematographic film copyright licensing as Information Technology (IT) software. This classification led to a higher tax rate of 18% instead of the applicable 12% for other intellectual property licensing.
Dharma Productions had challenged the GST authorities' move, arguing that their licensing agreements for theatrical, sound, satellite, and digital rights fell under SAC 997332, meant for film content. The authorities, however, relied on the electronic transmission of films and a statement from Dharma's Post-Production Head to reclassify the transactions as IT software.
The High Court bench, comprising Justice M.S. Karnik and Justice Sandesh D. Patil, distinguished between the content and its delivery method. It emphasized that a film is a passive audio-visual work, unlike interactive software. The court found no technical evidence presented by the authorities to support their IT software classification, stating that the essential character of the supply, not the mode of transmission, dictates GST classification. The court also criticized the procedural lapses by the authorities in handling the case, leading to the petitions being allowed on an erroneous legal premise.
