Legal and Tax Implications on Entertainment Based Events and Corporate Events

LEGAL AND TAX IMPLICATIONS ON ENTERTAINMENT BASED EVENTS AND CORPORATE EVENTS

I.

Licenses and Permission:

The licenses and permission required for an entertainment based event are as follows-

1. NOC (for erecting structure/stage) 2. Ticket selling license 3. Premises license 4. Performance license (application to be made to the Divisional Asstt. commissioner of Police) 5. Loud speaker license (application be made to the concerned Police station.) The procedure to be followed in order to obtain these licenses is as follow-

You will have to make an application in the prescribed format, affixing court fees stamp of Rs. 5. Please submit the application 15 days prior to the date of the programme along with following necessary documents. 1. NOC from the Landlord 2. NOC from the Traffic Police 3. NOC from the Fire Brigade 4. NOC from the Electrical Inspector. 5. NOC from the Health Department of BMC (if eatables are being served) 6. NOC from the Collector (if there is ticket selling or charity show) 7. NOC from the Rangabhumi Parinirikshan Mandal 8. Certificate regarding fitness of the machinery (in case of amusement rides) Time required to obtain the above mentioned license is given belowIt will take 15 days. The application will be sent to the concerned Police station for enquiry. After receipt of the enquiry report from Police station through divisional ACP and zonal DCP, a decision will be taken and accordingly, the license will be issued. The required fee for the licenses is as stated belowThe fee for an NOC is Rs. 50 Ticket selling fee is Rs. 50 The premises license fee is Rs. 500 The performance license fee will be collected by the divisional ACP

The loudspeaker license fee will be collected by the concerned Police station (the fees may vary depending upon the nature and period of the program) Entertainment tax What is entertainment tax? Entertainment tax is levied on entertainment to which persons are admitted on payment. On what is entertainment tax levied? Entertainment tax is levied on different kinds of entertainment under the applicable state legislations. Under the Bombay Entertainments Duty Act, 1923, entertainment tax is levied in Maharashtra on any exhibition, performance or amusement, to which persons are admitted for payment. This tax is also applicable to cable operators. At what rate is entertainment tax levied? Entertainment tax is levied between 20-35% of charges collected by way of subscription or installation or any other charge for entertainment. An additional surcharge of 10% is also levied. IPRS (Indian Performing Right Society) The IPRS came into existence on 23rd August 1969. The IPRS is a representative body of Owners of Music, viz. The Composers, Lyricists (or Authors) and the Publishers of Music and is also the sole Authorized Body to issue Licenses for usage of Musical Works & Literary Music within India by any person. Composers are those who are better known as Music Directors, Authors are better known as Lyricists, Publishers of Music are the Music Companies, or those who hold Publishing Rights of the Musical & Literary Works. The Society is a non-profit making Organization and is a Company Limited by Guarantee and Registered under the Companies Act, 1956. It is also registered under Section 33 of the Copyright Act, 1957 as the only Copyright Society in the Country to do business of issuing Licenses for usage of Music. In other words, IPRS is the only National Copyright Society in the Country which is permitted to commence and carry on the Words or any Action intended to be sung, spoken or performed with the music. It has received the Certificate of Registration from the Registrar of Copyrights dated 27-3-1996. What is a IPRS license? The Society grants blanket Licenses for a moderate annual charge which enables the holders thereof to comply with the provisions of the Copyright Act, 1957. These Licenses authorize the public performance, broadcasting, or diffusion by wire of any of the millions of works which the Society controls on its member’s behalf as well as on behalf of the members of its affiliated societies throughout the world.

In certain cases, ‘permits’ are issued for the use of the repertoire – or of specific works – at one performance or at a short series of performances. The Society's License is necessary for any public performance of copyright music under its control regardless of the nature of the entertainment or the kind of premises at which the performance takes place and irrespective of whether a charge for admission is made. What Rights does IPRS administer? The Copyright Act, 1957 provides that among the exclusive rights granted to Authors and Composers in respect of their works are the following: (i) (ii) (iii) (iv) (v)

the right to perform the work in public; the right to communicate the work by broadcast; the right to communicate the broadcast of the work to the public by a loud speaker; the right to communicate the broadcast of the work to the public by any instrument; the right to make any record in respect of the work.

The first four rights are generally referred to by the single expression ‘Performing Rights’, and the last right is referred to as ‘Mechanical Rights’, and are administered on behalf of its members by the IPRS. The expression ‘ Performing Right’, means and includes the right of performing in public, broadcasting and causing to be transmitted to subscribers to a diffusion service in all parts of the world, by any means and in any manner whatsoever, all musical works or parts thereof and such words and parts thereof (if any) as are associated therewith including (without prejudice to the generality of the expression ‘musical works’) the vocal and instrumental music in cinematograph films, the words and/or music of monologues having musical introduction, and/or accompaniment, and the musical accompaniment of non-musical plays, dramatic-musical works including operas, operettas, Musical plays, revues or pantomimes and ballets, video, plays, serials, documentaries, dramas, commentaries etc. accompanied by music and the right of authorising any of the said Acts. The expression ‘Mechanical Right’, means and includes the right of making recordings of all musical works or parts thereof and such words and parts thereof (if any), and ‘recording’ includes without limitation to the generality of the expression the aggregate of sounds embodied in records, discs, tapes and cartridges of all kinds.

PPL (Public Performance License) Phonographic Performance Ltd is the Copyright Society in respect of Sound Recordings and is registered with the Government of India. PPL is mainly engaged in Administering the Broadcasting, communication to Public and Performance Rights on behalf of over 260 music companies which are its members.

The Phonographic Performance Ltd. (PPL) has been functioning as the Copyright Society for Sound Recordings of its member music labels. After the 1994 amendments in copyright law, PPL was Registered with the Registrar of Copyrights, Government of India in 1996, as the Copyright Society, permitted to carry on business in Sound Recordings. License for Public Performance of Music recordings is Mandatory. Subject to the Copyright Act of 1957, it is mandatory for all those who play Pre-recorded music in the form of Gramophone Records, Music cassettes or CDs or Radio or Audio-visual in public places to take prior license from the Copyright Society for Sound Recordings namely Phonographic Performance Limited (PPL). In respect of the repertoire its member music labels. As the registered copyright society in respect of Sound Recordings PPL has the authority to administer the Broadcasting / Telecasting and Public Performance Rights on behalf of a large number of important music companies in India who are its members. PPL administered repertoire encompasses all major Indian languages, including Hindi, Punjabi, Bengali, Telugu, Tamil, Marathi, Guajarati, Malayalam, Bhojpuri, etc. (both film and non-film music like devotional/spiritual, Ghazals, Classical, folk, Indi-pop, etc) and English/International songs. Consequently, any performance of Indian or International music from Sound Recordings of PPL members in Public Places or Commercial Establishments such as Hotels, Restaurants, Cinema Halls, Discotheques etc, without first having obtained a License from PPL, constitutes an Infringement of copyright under The Copyright Act of 1957. Such violation of copyright is Cognizable & Non-bailable offence, attracting heavy Penalties. Licensing Streams The value of music is indisputable. Music is everywhere around us: on radio and television, in films, bars, clubs, discotheques, gyms, restaurants, hotels, offices, shopping malls, concerts, fetes, festivals, airplanes and taxis. Recordings of music are manufactured, sold, and distributed on a large scale. Music is an important facet of modern life. PPL has the authority to administer the Broadcasting, Telecasting, Webcasting and Public Performance rights on behalf of more than 260 music companies in India. Television License - Applicable to Serials & Reality-shows which involve usage of sound recordings e.g. Boogie Woogie on SET.

Telecom Related Licences - For Ring-back Tones, Music Messaging, IVRS, Moble streaming, Mobile embedded / pre-loaded and other Telecom value added services involving the usage of sound-recordings (in whole or in part). Radio License - All Private and Government owned Radio Stations; community radio stations. Internet License - This License is granted to websites for non-interactive streaming of music, no downloads allowed. Public Performance (Background music) License - Playing of sound-recordings in public (i.e. excluding domestic home and private vehicle), in the background. A license taken for "Background music" does not entitle the licensee to exploit the licensed sound-recordings in an event or show or concert or stage or dance-floor, etc., for which a separate/additional "Events" licence is required to be taken (see below). Public Performance (Events) License - Playing of sound-recordings in an event or show or concert or stage or dance-floor, etc. where performers perform on stage or a designated area. Explanation:- A hotel or a shopping mall which has obtained a mere "background music" license needs to obtain separate license for its discotheque, restaurant, lounge bar, spa/health club A hotel or shopping mall or banquet-hall or discotheque or ball-room which has obtained a mere "background music" licensee needs to obtain separate license for any Event (including shows, promotions, DJ parties, fashion shows etc.) held in its premises. Public Performance (Storage) License - Temporary Storage, embodiment, transfer etc of sound-recordings. Eg storage of songs by DJs on DJ systems; storage on computer servers by aggregators, for onward transmission etc. List of PPL under EVENTS categoryPart C - "EVENTS" LICENSE 1

Discotheques, Lounge-bars, Dance-floors, etc.

33A

Events - with sponsors, tickets, title sponsors

33B

Events - without sponsors, tickets

33C

Events - where the entire revenue goes to recognized charitable institution

33D

Events - B'day & other functions in commercial

premises where DJ is used 33E

Events - College festivals

33F

Product or Brand launches

33G

Road show

33H

Sports events

33I

Fashion shows

Service Tax Service Tax is a form of indirect tax imposed on specified services called "taxable services". Service tax cannot be levied on any service which is not included in the list of taxable services. Over the past few years, service tax been expanded to cover new services. The objective behind levying service tax is to reduce the degree of intensity of taxation on manufacturing and trade without forcing the government to compromise on the revenue needs. The intention of the government is to gradually increase the list of taxable services until most services fall within the scope of service tax. For the purpose of levying service tax, the value of any taxable service should be the gross amount charged by the service provider for the service rendered by him. Some of the major services that come under the ambit of Service Tax are: Telephone Stockbroker General Insurance Advertising agencies Courier agencies Consulting engineers Custom house agents Steamer agents Clearing & forwarding agents Air travel agents

Tour operators Rent-a-Cab Operators Manpower recruitment Agency Mandap Keepers Architects Interior Decorators Management Consultants Practicing Chartered Accountants Practicing Company Secretaries Practicing Cost Accountants Real Estates Agents/Consultants Credit Rating Agencies Private Security Agencies Market Research Agencies Underwriters Agencies Scientific and technical consultancy services Photography Convention Telegraph Telex Facsimile Online information and database access or retrieval Video-tape production Sound recording Broadcasting

Insurance auxiliary activity Banking and other financial services Port Authorised Service Stations Leased circuits Services Auxiliary services to life insurance Cargo handling Storage and warehousing services Event Management Cable operators Beauty parlours Health and fitness centres Fashion designer Rail travel agents Dry cleaning services Commercial vocational institute, coaching centres and private tutorials Technical testing and analysis (excluding health & diagnostic testing) technical inspection and certification service Maintenance & repair services Commission and Installation Services Business auxiliary services, namely business promotion and Support services (excluding on information technology services) Internet café Franchise Services Out door Caterer’s service Airport Services

Transport of Goods by Air Services Business Exhibition Services Intellectual Property Services Opinion Poll Services TV or Radio Programme Services Survey and Exploration of Minerals Services Travel Agent's Services other than Rail and Air travel agents Forward Contract Services Transport of goods through pipe line or other conduit Service Site preparation & clearance Services Dredging Services Survey & Mapmaking Services Cleaning Services Membership of Clubs & Associations Packaging Services Mailing list compilation & Mailing Services

SERVICE TAX ON EVENT MANAGEMENT SERVICESService tax has been imposed on Event Management services with effect from 16th August, 2002, vide Notification No. 8/2002-ST, dated 1.8.2002. The gross amount charged to or total consideration received from a client by an event manager in relation to event management services shall be chargeable to service tax. What is Event Management Section 65(40) defines 'event management' as under — "event management" means any service provided in relation to planning promotion, organising or presentation of any arts, entertainment, business, sports, marriage or any other event and includes any consultation provided in this regard. Thus, as per Section 65(40), event management means any service provided in relation to planning, promotion, organising or presentation of any arts, entertainment, business, sports,

marriage or any other event and includes any consultation provided in this regard. The services of event management should be provided on commercial basis. The event management services would cover certain specific services in relation to consultation planning promotion organizing, or presentation, of any of the following — (i)

arts

(ii)

entertainment

(iii)

business

(iv)

sports

(v)

marriage (w.e.f. 1-6-2007)

(vi)

any other event

Amendments made by Finance Act, 2007 (w.e.f. 1-6-2007) Finance Act, 2007 has amended the definition of event management so as to include marriage in the scope of the definition of event management. This will imply that 'marriage' as an event shall also now qualify as an event for service tax purpose. This has been specifically included in the definition as 'marriage' which was not getting covered under earlier expressions of arts, entertainment, business, sports or any other event. Now the organizing of marriage functions and management as well as consultancy in relation to event of marriage will be subject to levy of service tax. Who is Event Manager Section 65(41) defines 'event manager' as under — "event manager" means any person who is engaged in providing any service in relation to event management in any manner.

Following two features are clear from this definition (i)

event manager can be any person ie, natural or legal.

(ii) He must be engaged in providing services in any manner in relation to management of any event. Taxable Service Section 65(105)(zu) defines taxable service to mean service provided or to be provided to any person by an event manager in relation to event management. The basic tests for taxability of event management service are (a)

Service must be provided to any person (w.e.f. 16-5-2008).

(b)

Service must be in relation to event management.

(c)

Service must be provided by event manager.

Replacement of 'client' with 'any person' (w.e.f. 16.5.2008) Finance Act 2008 has substituted the words 'any person' for the word 'client' (w.e.f. 16.5.2008) as the service tax is levied on service and status of recipient of taxable service should not determine the tax treatment of a given service.

Tax deducted at source

TDS is one of the modes of collecting Income-tax from the assessees in India. Such collection of tax is effected at the source when income arises or accrues. Hence where any specified type of income arises or accrues to any one, the Income-tax Act enjoins on the payer of such income to deduct a stipulated percentage of such income by way of Income-tax and pay only the balance amount to the recipient of such income. The tax so deducted at source by the payer, has to be deposited in the Government treasury to the credit of Central Govt. within the specified time. The tax so deducted from the income of the recipient is deemed to be payment of Income-tax by the recipient at the time of his assessment. Income from several sources is subjected to tax deduction at source. Some of such income subjected to T.D.S. are salary, interest, dividend, interest on securities, winnings from lottery, horse races, commission and brokerage, rent, fees for professional and technical services, payments to non-residents etc.

Nature of payments attracting TDS and rates thereon: Salary DDOs must calculate the tax payable by an employee for the year and start deducting tax at average rate. The term salary includes wages, any annuity or pension, gratuity, any fees, commission, perquisites or profits in lieu of or in addition to any salary or wages. (These payments are covered under sec. 192 of the Income Tax Act 1961). The income from salaries is required to be computed on estimated basis at the beginning of each financial year, taking into account salaries or remuneration paid or allowed. Income Tax payable on the basis of such estimated salary income should be deducted at the rate applicable to the corresponding slab of income every month in equal instalments subject to adjustments depending upon tax saving investments made by the deductee. When an employee is working with more than one employer simultaneously or has changed employment from one employer to another during the relevant financial year, the employer will deduct tax on considering the aggregate salary from all sources and tax deducted thereon, if any. Interest on securities/Dividends/Interest/Insurance commissionThe tax has to be deducted @ 20% for domestic companies and 10% for others with some basic exemption limits, in the case of interest if the amount of interest is up to Rs. 5000/- during a financial year. however, in the case of interest paid by a banking company, Co-operative society engaged in the business of banking and a public company engaged in the financing or construction of residential houses in India, this limit is Rs. 10000/-. (These payments are covered under sec. 193, 194, 194A& 194D of the Income Tax Act 1961 resp.). Winning from lottery, puzzle or games of any sortThe DDO/deductor must deduct tax @ 30% on any payment above Rs. 5000/-. (However from 1st July 2010,the DDO/deductor must deduct tax @ 30% on any payment above Rs. 10000/-) (These payments are covered under sec. 194B of the Income Tax Act 1961).

Winning from horse racesThe DDO/deductor must deduct tax @ 30% on any payment above Rs. 2500/-. (However from 1st July 2010,the DDO/deductor must deduct tax @ 30% on any payment above Rs. 5000/-). (These payments are covered under sec. 194BB of the Income Tax Act 1961). Contracts (including work land labour contract) The tax has to be deducted @ 2% on contract payments and 1% for subcontract and advertisement contract payments. The tax is required to be deducted if a single payment exceeds Rs. 20000/- or if the aggregate payments exceed Rs. 50000/- per annum. (However from 1st July 2010, Rate of deduction is @ 2% on all contract payments including subcontract and advertisement contract payments. The tax is required to be deducted if a single payment exceeds Rs. 30000/- or if the aggregate payments exceed Rs. 75000/- per annum). (These payments are covered under sec. 194C of the Income Tax Act 1961). Insurance commissionAny person responsible for paying to a resident any remuneration or reward whether by way of commission or otherwise, for procuring insurance business is required to deduct tax @ 20% for companies and 10% for other person if the amount credited or paid is more than Rs. 5000/- in a financial year. (However from 1st July 2010, any person responsible for paying to a resident any remuneration or reward whether by way of commission or otherwise, for procuring insurance business is required to deduct tax @ 20% for companies and 10% for other person if the amount credited or paid is more than Rs. 20000/- in a financial year). Payments to Non residents sportsmen or sport association.The tax has to be deducted @10% on making any payment. (These payments are covered under sec. 194E of the Income Tax Act 1961).

Commission on sale of lottery tickets and on brokerage-. The tax has to be deducted @10% with some basic exemption. (These payments are covered under sec. 194G & 194H of the Income Tax Act 1961).

RentAny amount paid as rent above Rs. 120000/- per year will attract TDS provisions @ 10% for Individual & HUF and 20% for others. (TDS will be 2% for the use of any machinery or plant or equipment). (However from 1st July 2010, any amount paid as rent above Rs. 180000/- per year will attract TDS provisions @ 10% for Individual & HUF and 20% for others). (These payments are covered under sec. 194I of the Income Tax Act 1961). Fees for professional or technical services/royalty/Income on units of mutual funds/compensation on acquisition of certain immovable assetsThe tax has to be deducted @10% with some basic exemption limits. (These payments are covered under sec. 194J, 194K & 194LA of the Income Tax Act 1961). Payment on Acquisition of certain immovable propertyAny amount above Rs. 100000/- paid as compensation or enhanced compensation on account of compulsory acquisition under any law in force, of any immovable property other than agricultural land will attract TDS provisions @ 10%.