Judgment

S.H. KAPADIA, J.- Leave granted.

2. The short question which arises for consideration in this civil appeal is as to what is the scope of enquiry by the prescribed authority under Section 10(23-C)(vi) read with the third proviso thereto inserted by the Finance Act, 1998 w.e.f. 1-4-1999. In this case, the Central Board of Direct Taxes (CBDT) being the prescribed authority, at the relevant time, rejected the application for approval dated 7-4-1999 vide its order dated 12-10-2004. The said order has been upheld by the impugned judgment dated 24-11-2006 delivered by the Delhi High Court in Writ Petition (C) No. 17978 of 2004, hence, this civil appeal.

3. Briefly, the facts are as follows:

The claim of the appellant is that it is a non-profit organisation set up in USA and has been granted tax exemption as an educational institute in that country. The appellant has a branch office in India mainly to comply with its obligations under various agreements with the Government of India (Ministry of Tourism). Its branch provides a central focal point in India for Indian missions to avail of its educational courses. Its branch collects data from educational institutions/persons wishing to take the courses offered in the field of Hospitality and fees for the required course material which is thereafter remitted to USA. After collection of data and fees, the Head Office (HO) sends course materials, examination papers, etc. to the branch in India for onward transmission to the actual user. It is the case of the appellant that its Indian branch is a small office in which administrative work is done. Few employees attend to this work. The cost of running the branch office is met by deducting the same from the amounts remitted to the HO.

4. Thus, the appellant is an institution whose objects are known as "Statement of Purposes" in US. Under the Internal Revenue Code, 1954 in US it enjoys tax exemption status as an educational institution. It is governed by an elected Board of Trustees and it offers high quality educational and training resources to enhance tile professionalism of the hospitality industry worldwide.

5. In 1993, the National Council of Hotel Management and Catering Technology, the apex Indian body overseeing hotel management and catering education under the Ministry of Tourism, signed Moll with the Educational Institute ("EI", for short) under which approval was granted to use courses, resources and expertise of the appellant in India with a view to improve the quality of hospitality education and training in India. Consequently, the appellant opened a liaison office in Mumbai in July 1994 with the approval of Reserve Bank of India ("RBI", for short). Subsequently, in February 1995 the liaison office was upgraded to a branch office with the approval of the Ministry of Finance, Government of India and RBI.

6. According to the MoU, the appellant has to fulfil the following obligations:

"The Institute will:

(a) provide a full and complete, world-recognised curriculum for all hospitality education programs in India;

(b) make available for reproduction in India the texts, course materials and software programs utilised in the Institutes Hospitality Management Diploma;

(c) provide a comprehensive faculty development program to upgrade the professionalism and instructional ability of those teaching hospitality management courses in India;

(d) offer a comprehensive certification and registration program for individuals currently employed in the hospitality industry in India;

(e) develop an accreditation system to permit the National Council to qualify and recognise proprietary schools;

(j) develop through grant support, an entrance test to identify individuals best qualified to enter the hospitality industry;

(g) establish an office in India to implement and coordinate the Institutes activities;

(h) offer the National Council the lowest possible prices for the products and services sold to or utilised by the schools under the umbre