Anushka Sharma ‘First Owner Of Copyrights’ Of Artistic Performances, Liable To Pay Tax: Sales Tax Department Tells Bombay High Court

Actor Anushka Sharma was the first owner of copyrights created in her artistic performances and therefore liable to pay sales tax for brand endorsements and for comparing award functions, the Sales Tax Department informed the Bombay High Court.

The department claimed that unlike an employee working for a company, Sharma had earned monies through tri-party contracts with Yashraj Films as her agent, therefore, her petitions in which she assailed tax notices from 2012- 2016 should be dismissed.

"She is providing her services and earning income through contract for services and not through contract of services (Not employed with anybody). Therefore, under Section 17 of the Copyright Act 1957 she is first owner of Copyrights created in her artistic performances," the affidavit read.

Significantly the department also opposed the pleas on the ground of maintainability as she had an alternate remedy under section 26 of the Maharashtra Value Added Tax Act.

The Case

Sharma had filed the tax petition challenging orders of the deputy commissioner of sales tax, Mazgaon, regarding dues from 2012-13 and 2013-14 for assessment under The Maharashtra Value Added Tax Act.

It is Anushka's case that the assessing officer wrongly held that by endorsing products and anchoring she acquired copyrights which are tangible goods, that are sold and transferred. She was liable to pay only 5% tax, she said. She contended that the copyright always remains with the producer or the respective artist as the case may be.

In her plea, she claimed to have acted in several films as well as award functions according to the tri-party agreement with Yashraj Films Pvt Ltd. The assessing officer levied sales tax for endorsements and comparing events. The demand inclusive of interest was Rs. Rs. 1.2 crore and 12.3 Crore for 2012-13 and for 2013-14 it was nearly Rs. 17 crore. Sharma said there was no way to appeal against this unless 10% of the tax was paid.

In an affidavit filed by David Alvares, Joint Commissioner of Sales Tax, the department contended since there are provisions for appeal and revision under the Act Sharma couldn't have directly approached the HC. The Act in fact had a provision for a second appeal before the Maharashtra Sales Tax Tribunal, the affidavit read.

Regarding the facts of the case, the department claimed that based on Sharma's Talent Management agreement with Yashraj, the department has concluded that she is a performer under the Copyrights Act.

Copyrights would mean a collection of rights that automatically vest to someone who creates an original work…These rights include the right to reproduce the work, to prepare derivative works, to distribute copies, and to perform and display the work publicly.

The department state that through Sharma’s YRF Talent Management agreement, she entered into tripartite agreements with various companies such as Nivea India Pvt. Ltd. Gitanjali Gems, Gitanjali Lifestyle, Cannon India, Semora Entertainment Works, Oranjuice Entertainment etc.

According to the terms of her agreement, she receives consideration for her artistic performance from the client company which is then used by the client company for commercial purposes like advertisement, entertainment.

At this time, the Copyright involved in her performance is also get transferred to client company, the department said. Such transfers are covered under definition of Sale 2(24) of the MVAT Act.

Thus, Anushka Sharma is artist entitled to Copyright in her every work of artistic performance. As per various tri-party agreements for services provided by Anushka Sharma, along with her artistic performance the Copyright is get transferred and used by her client company for which she is receiving valuable consideration.

The department clarified that she wasn’t being taxed for her film performances under the MVAT Act as those rights belong to the film producer.