AMERICAN HOTEL AND LODGING EDUCATIONAL INSTITUTE Vs. CENTRAL BOARD OF DISTRICT TAXES MINISTRY OF FINANCE

JUDGEMENT

(1.) Rule. With the consent of Counsel (i) rule is made returnable forthwith; and (ii) the petition is taken up for hearing and final disposal.

(2.) The petitioner claims to be a non-profit organization, established in the United States, and has a branch in India through which it carries out educational activities. The principal challenge in these proceedings is to an order dated 3 November, 2009 issued by the Central Board of Direct Taxes (CBDT) to the extent to which it imposes a condition that the petitioner must "apply 75% of its accounting income for educational purposes in India". Alternatively, there is a plea that the condition should be applied prospectively and that the petitioner be granted a reasonable period for compliance. There is an ancillary challenge in these proceedings to an order dated 22nd December, 2009 issued by the Director of Income Tax (International Taxation), the second respondent, directing the petitioner to furnish security to cover the demand of tax for assessment years 1999-2000 to 2006-2007. The petitioner has sought a stay on the recovery of the outstanding demand for these assessment years. For assessment years 1999-2000 to 2001-2002 approval has been granted to the petitioner under section 10(23C)(vi) of the Income Tax Act, 1961 by the Central Board of Direct Taxes subject to the condition noted earlier. For assessment years 2002-2003 to 2006-2007, orders have still not been passed by the Central Board of Direct Taxes or by the prescribed authority. The grievance of the petitioner is that the inaction on the part of the respondents is in breach of the principles laid down by the Supreme Court in a decision rendered on 9 May, 2008 in American Hotel and Lodging Association Educational Institute vs. Central Board of Direct Taxes and others, 2008 301 ITR 86. This decision was rendered on an appeal of the petitioner against a judgment of the Delhi High Court.

(3.) The petitioner entered into a Memorandum of Understanding (MoU) on 27 May 1993 with the National Council for Hotel Management and Catering Technology, which is an apex Indian body overseeing education in hotel management and catering. Pursuant thereto, the petitioner is required to offer its courses and expertise in order to improve the quality of hospitality education and training in India. As part of its obligations under the MoU, the petitioner provides a curriculum for hospitality education programs, course materials, a faculty development program, certification and registration and an accreditation system to permit the National Council to recognize proprietary schools.