2024 (9) TMI 55 - AT - Income Tax

Exemption u/s 11 - income towards loans given as scholarship to various students for higher education abroad - According to the AO income should have been applied for charitable purpose on education within Indian territories and not outside India - as submitted mere fact that persons to whom payments have been made for charitable purpose is Indian and payment has been made in Indian territory is not sufficient but the activity related to charitable purpose for which payment is made, should also happen within Indian territory - HELD THAT - As decided in Jamsetji Tata Trust 2014 (5) TMI 890 - ITAT MUMBAI disbursal of loan scholarship to students in India for study overseas as application of income for charitable purposes in India. As the facts and circumstances of the instant case are identical to the facts of decisions relied upon by the Ld. CIT(A) therefore, we uphold the order of the CIT(A) on the issue in dispute. The grounds of appeal of the Revenue are accordingly dismissed.

Summary

Issues:
1. Whether loans granted for scholarships for overseas education can be considered as application for charitable purpose under section 11 of the Income-tax Act?
2. Whether the decision of the Hon'ble ITAT in a specific case can be relied upon to allow exemption under section 11 of the Income-tax Act?

Analysis:

Issue 1:
The case involved a dispute regarding the treatment of loans granted as scholarships for overseas education by an assessee trust under section 11 of the Income-tax Act. The Assessing Officer disallowed the application of income towards such scholarships, arguing that the funds should have been utilized for charitable purposes within Indian territories. However, the Ld. CIT(A) relied on a decision of the Co-ordinate Bench in the case of Jamsetji Tata Trust, where it was held that granting scholarships to Indian students in India for education abroad fulfills the conditions of application of money for charitable purposes in India. The Ld. CIT(A) deleted the disallowance based on this precedent, emphasizing that the application of income was completed in India when the grants were released. The Appellate Tribunal upheld the decision of the Ld. CIT(A), stating that the facts of the instant case were identical to the earlier decision, and hence, loans granted for scholarships for overseas education could be considered as application for charitable purposes in India. Therefore, the appeal of the Revenue was dismissed.

Issue 2:
The second issue revolved around whether the decision of the Hon'ble ITAT in the Jamsetji Tata Trust case could be relied upon to allow exemption under section 11 of the Income-tax Act. The Revenue contended that their appeal was based on the fact that the Department had not accepted the earlier decision on merits and had filed an appeal before the Hon'ble High Court, which was pending adjudication. However, the Appellate Tribunal upheld the decision of the Ld. CIT(A) based on the precedent set by the Co-ordinate Bench in the Jamsetji Tata Trust case. The Tribunal emphasized that since the facts of the present case aligned with those of the earlier decision, the order of the Ld. CIT(A) was upheld, and the appeal of the Revenue was dismissed.

In conclusion, the Appellate Tribunal upheld the decision of the Ld. CIT(A) regarding the treatment of loans granted for scholarships for overseas education as application for charitable purposes under section 11 of the Income-tax Act. The Tribunal also ruled that the precedent set by the Co-ordinate Bench in the Jamsetji Tata Trust case could be relied upon, dismissing the appeal of the Revenue.