Explaining the business model in light of tax law
| Facts | Our client is a Private Limited Company engaged in the purchase and sale of syndicated content, i.e., newspaper columns written by celebrity sports persons. Service tax demand was raised on the ground that the sale turnover of syndicated columns was liable to Service tax because the company was not eligible for exemption in respect of services of transfer of copyrighted literary work. In the adjudication proceedings, our clients the authority ruled in favor of our clients. However, department proceeded in appeal against the adjudication order. In its ground of appeal, department claimed that when the literary work is purchased from the author, only then it is an ‘Original Literary Work’. Such literary work when purchased from a person other than the author ceases to remain an ‘Original Literary Work’. Hence, our client was not eligible for service tax exemption in respect of outward services rendered in this respect. |
| Our argument | In our cross-objections, we argued that – The limited question is whether the work purchased from a person other than the author remains ‘Original Literary Work’ or not. Here, we examine the test of originality. In Mishra Bandhu Karyalaya And Ors. vs Shivratanlal Koshal, (MP High court refer annexure 3) and also various other rulings the Indian and British courts have held the term ‘Original’ to mean as under – “The word ‘original’ does not mean that the work must be the expression of original or inventive thought. Copyright Acts are not concerned with the origin of ideas, but with the expression of thought; and in the case of literary work’ with the expression of thought in print or writing. The originality which is required relates to the expression of the thought; but the Act does not require that the expression must be in an original or novel form, but that the work must not be copied from another work–that it should originate from the author.” (emphasis added) Thus, we find that the only requirement for a literary work to be ‘Original’ is that it should not have been copied from another work. Hence, any work which is ‘Original’, i.e., not copied from another work, remains original even if the owner of the work sells the work to another and that another sells it to yet another without altering the contents. To illustrate, a) A person who owns a painting by the famous artist M.F.Hussain, sells the painting to another person, will the painting become unoriginal just because it has been sold by a person who is not the owner thereof? b) A music company sells an original composition of music on CD to its customers. Just because the composition is sold by the music company and not the composer, does the CD become an unoriginal CD? c) An author sells the rights of his novel to a book publisher who prints several copies and sells the printed book to buyers. Does the sale by the publisher make the literary work not original? |
| Result | In the result, the appellate authority accepted our argument and set aside the adjudication order. |