Exemption approval pending and books supply not royalty: Tribunal restored assessment and rejected technical services characterization.

Approval applications under section 10(23C)(vi) were pending before the CBDT, and the Tribunal held that the exemption and related expense claim should be re-examined after the CBDT's decision; the assessments were restored for fresh adjudication and the appeals were allowed for statistical purposes. On the books payment issue, the Tribunal found that supply of books by the head office for distribution to students did not amount to making available technical knowledge or services, and the payment was not taxable as royalty or fees for technical services. The Revenue's challenge on that point failed.

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Issues: (i) Whether the assessee's claim for exemption under section 10(23C)(vi) of the Income-tax Act, 1961 and the related expense claim should be finally decided for the assessment years in question or restored for fresh assessment after awaiting CBDT's decision; (ii) Whether payment made towards books supplied by the head office could be treated as royalty or fees for technical services.

Issue (i): Whether the assessee's claim for exemption under section 10(23C)(vi) of the Income-tax Act, 1961 and the related expense claim should be finally decided for the assessment years in question or restored for fresh assessment after awaiting CBDT's decision.

Analysis: The assessee's approval applications under section 10(23C)(vi) were stated to be pending before the CBDT, and the Supreme Court had earlier directed fresh consideration of the approval request while recording that the threshold condition of actual existence of an educational institution stood satisfied. In this backdrop, the Tribunal found no useful purpose in retaining the appeals and held that the assessments should be redone after awaiting the CBDT's decision. The related claim for head-office expenses was also directed to be examined afresh in the same manner.

Conclusion: The issue was restored to the Assessing Officer for fresh assessment after awaiting the CBDT's decision, and the assessee's appeals were allowed for statistical purposes.

Issue (ii): Whether payment made towards books supplied by the head office could be treated as royalty or fees for technical services.

Analysis: The books were supplied by the head office for distribution among students, and the Tribunal agreed with the finding that such supply did not amount to making available technical knowledge, skill, or services to the Indian branch. The Revenue did not bring material to disturb the factual conclusion recorded by the first appellate authority that the payment was only towards books and not towards royalty or technical services.

Conclusion: The payment towards books was not taxable as royalty or fees for technical services, and the Revenue's appeal was dismissed.

Final Conclusion: The matter on exemption and related expenditure was sent back for fresh adjudication, while the Revenue's challenge on the books payment failed, leaving the assessee with a remand and the Revenue without relief.

Ratio Decidendi: Where approval under section 10(23C)(vi) remains pending pursuant to earlier judicial directions, the assessment may be restored for fresh consideration, and a mere supply of books by a head office does not constitute royalty or fees for technical services in the absence of making available technical know-how.

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