AMERICAN HOTEL AND LODGING ASSOCIATION EDUCATIONAL INSTITUTE Vs. CENTRAL BOARD OF DIRECT TAXES MINISTRY OF FINANCE GOVERNMENT OF INDIA NEW DELHI

JUDGEMENT

(1.) The Petitioner is the branch office of a non-profit organization set up in America and carries on educational activities. It is aggrieved by an order dated 12th October, 2004 passed by the Central Board of Direct Taxes (CBDT) rejecting its application dated 7th April, 1999 for initial approval of exemption under Section 10(23C)(vi) of the Income Tax Act, 1961 (for short the Act) for the assessment year 1999-2000. For convenience the Petitioner is called the branch office, while the American organization is called the head office.

(2.) The head office of the Petitioner enjoys tax exemption in America as an educational institution under Section 501(c)(3) of the Internal Revenue Code of 1954. Sometime in 1993, it entered into a Memorandum of Understanding (MoU) with the National Council for Hotel Management and Catering Technology under the Ministry of Tourism of the Government of India for offering its courses and expertise with a view to improve the quality of hospitality education and training in India.

(3.) For the purposes of discharging its obligation under the MoU, the head office opened a liaison office at Bombay on or about 6th July, 1994 when it obtained approval from the Reserve Bank of India to do so. Thereafter, as its activities increased, it was permitted by the Reserve Bank of India by a letter dated 10th February, 1995 to convert its liaison office into a branch office for the purpose of undertaking the following activities:- (i) Research, reproduction, marketing etc. in relation to educational services and resources. (ii) Provide educational services and resources to the target groups consisting of hospitality industry, training institutions and individuals.