2017 (11) TMI 311 - AT - Income Tax

Claim for exemption under section 10(23C)(vi) - Held that - It would be in the fitness of things the matter is restored back to the file Assessing Officer to make the assessment afresh of course after awaiting the order of the CBDT on assessee s application for grant of approval under section 10(23C)(vi) of the Act as has been directed by the Hon ble Supreme Court in AMERICAN HOTEL & LODGING ASSOCIATION EDUCATIONAL INSTITUTE case(2008 (5) TMI 17 - SUPREME COURT OF INDIA). The Assessing Officer is further directed to ascertain at the earliest the status of assessee s application pending before the CBDT and in the course of such an exercise he ought to bring it to the notice of the CBDT the statutory time limit if any applicable to make the ensuing assessment so that the disposal of the application pending with the CBDT is carried out expeditiously. Needless to mention the assessee is expected to render appropriate co-operation to the income-tax authorities in the matter. Even on the claim of expenses incurred by the Head Office on behalf of its Indian Branch the matter is sent back to the Assessing Officer to be adjudicated afresh in accordance with law only after awaiting the outcome of the assessee s application pending with the CBDT. Thus we hereby set-aside the order of the CIT(A) and restore the matter to the file of the Assessing Officer to make a denovo assessment in accordance with law after affording the assessee a reasonable opportunity of being heard. Thus for assessment year 2007-08 the appeal of the assessee is allowed for statistical purposes. Payment made towards books cannot be treated as royalty - Held that - Findings of the CIT(A) that the HO has supplied the books to the appellant branch for distribution among students in India. The books belongs HO on which expenditure is incurred by the Head Office. However the cost of books is apportioned to branch in proportionate of cost for which the CPA has given the cost of material supplied. Further find that the AO himself allowed deduction of cost of books amounting to Rs. 3, 56, 567 towards cost of books on the basis of evidence submitted by the appellant. It is also seen that books made available to branch by HO does not make available the technology hence it cannot be considered as fees for technical services within the meaning of Article 12(4) of Double Taxation Avoidance Agreement In the light of above the observation of the AO is without any basis . Hence the payment made towards books cannot be treated as royalty /fees for technical services. This ground is therefore allowed. No cogent reasoning or material brought out by the Revenue which would require us to interfere with order of the CIT(A) - Decided against revenue.

Summary

Issues:
Assessee's claim for exemption under section 10(23C)(vi) of the Income Tax Act, 1961 for assessment years 2007-08 and 2008-09.

Analysis:
1. Assessment Year 2007-08:
- The assessee, a branch of a non-profit organization in the USA, claimed exemption under section 10(23C)(vi) of the Act for the income derived from various educational activities. The Assessing Officer denied the exemption based on past denials and a CBDT order rejecting the application for exemption.
- The assessee argued that the CBDT had previously granted approval for exemption, and the matter was remitted back to the CBDT by the Supreme Court for fresh consideration. The application was still pending with the CBDT.
- The Tribunal decided to restore the matter to the Assessing Officer for a fresh assessment after awaiting the CBDT's decision on the exemption application. The Assessing Officer was directed to expedite the process and ensure cooperation from the assessee.
- The matter of expenses incurred by the Head Office on behalf of the Indian Branch was also sent back to the Assessing Officer for reevaluation after the CBDT's decision.
- The order of the CIT(A) was set aside, and the appeal of the assessee was allowed for statistical purposes.

2. Assessment Year 2008-09:
- The issues and disputes in this assessment year were similar to those in the previous year. Therefore, the Tribunal's decision in the appeal for 2007-08 was applied mutatis mutandis to this year as well.
- The Revenue's appeal regarding the treatment of payments made towards books as royalty/fees for technical services was dismissed. The CIT(A) had ruled that the books provided by the Head Office did not constitute technical services, and therefore, the disallowance by the Assessing Officer was not justified.
- The Tribunal found no reason to interfere with the CIT(A)'s decision on this matter and affirmed the order.
- Consequently, the appeals of the assessee were allowed for statistical purposes, while the Revenue's appeal was dismissed.

In conclusion, the Tribunal's judgment addressed the issues of exemption under section 10(23C)(vi) for the assessment years 2007-08 and 2008-09, emphasizing the need for fresh assessments based on the CBDT's pending decisions and ruling in favor of the assessee on the matter of payments made towards books.