2024 (9) TMI 144 - AT - Income Tax

Exemption u/sec 11 - application of fund utilized for grants/scholarships used for overseas education - application of income for charitable purposes within Indian territories OR abroad - HELD THAT - Education grant given to the Indian students in India for education/higher education abroad fulfills the conditions of application of money for such purpose in India. As decided in own case 2024 (9) TMI 55 - ITAT MUMBAI assessee has given grant to 97 scholars studying in various institutions and universities outside Indian. The assessee paid the grant in India and for the purpose of education of Indian students/persons, thus the charitable purpose of the grant is education of indian persons. The application of income of the assessee completes at the point when the assessee released the grant which took place in India. The decision relied upon by the revenue is not applicable in the facts of the present case as the application of income took place in India and for the purpose of education of Indian students/persons. Therefore, for taking education by beneficiary from abroad would not amount to application of income of the assessee outside India. DR could not controvert the findings of the CIT(A) with any new cogent material or information on the disputed issues to take different view as held disbursal of loan scholarship to students in India for study overseas as application of income for charitable purposes in India. Appeal filed by the revenue is dismissed.

Issues Involved:
1. Exemption under Section 11 of the Income Tax Act for funds used for overseas education.
2. Applicability of judicial decisions and precedents in granting the exemption.
3. Interpretation of "application of income" for charitable purposes within Indian territories.
4. Consequential interest under Sections 234B and 234D of the Income Tax Act.

Issue-Wise Detailed Analysis:

1. Exemption under Section 11 of the Income Tax Act for Funds Used for Overseas Education:
The primary issue revolves around whether the funds utilized by the assessee trust for granting scholarships to Indian students for overseas education qualify for exemption under Section 11 of the Income Tax Act. The Assessing Officer (AO) denied the exemption, arguing that the charitable purpose and its execution should occur within Indian territories. The AO cited the case of Director of Income-tax (Exemption) Vs National Association of Software and Services Companies (345 ITR 362) to support this view. The AO held that the amount of Rs. 4,04,35,275 spent by the assessee trust for charitable purposes outside India is not exempt under Section 11 and treated it as taxable income.

2. Applicability of Judicial Decisions and Precedents in Granting the Exemption:
The assessee appealed against the AO's decision, and the CIT(A) allowed the exemption based on the decision of the Hon'ble ITAT in the assessee's own case for A.Y 2010-11 and the case of Jamsetji Tata Trust Vs Jt.DIT(Exemptions)(2014) 44 taxmann.com 447 (Mumbai ITAT). The CIT(A) concluded that the education grants given to Indian students in India for overseas education fulfill the conditions of application of money for such purposes in India. The CIT(A) relied on the judgment that the application of income completes when the grant is released in India, regardless of where the education takes place.

3. Interpretation of "Application of Income" for Charitable Purposes Within Indian Territories:
The CIT(A) addressed the AO's interpretation that both the charitable purpose and its execution should occur within Indian territories. The CIT(A) emphasized that the charitable purpose of education is fulfilled when the funds are disbursed in India, even if the education occurs abroad. This interpretation aligns with the decisions in Bharata Kalanji vs. ITO 30 ITD 161 (Mad.) and H.E.H. The Nizam's Pilgrimage money trust vs. CIT 171 ITR 323, which state that the situs of expenditure is relevant, not the location where the charitable purpose is carried out.

4. Consequential Interest Under Sections 234B and 234D of the Income Tax Act:
The CIT(A) also addressed the issues of interest under Sections 234B and 234D, noting that these are consequential and do not require separate adjudication. The CIT(A) directed the AO to allow the exemption and dismissed the grounds related to interest as they are dependent on the primary issue of exemption under Section 11.

Conclusion:
The Hon'ble Tribunal upheld the CIT(A)'s decision, finding no infirmity in the order and dismissing the revenue's appeal. The Tribunal reiterated that the education grants given to Indian students in India for overseas education qualify as application of income for charitable purposes in India. The Tribunal also noted that the revenue could not present any new material to counter the CIT(A)'s findings. Consequently, the appeal filed by the revenue was dismissed, and the exemption under Section 11 was upheld.

Final Judgment:
The appeal filed by the revenue was dismissed, and the order of the CIT(A) granting exemption under Section 11 was upheld. The Tribunal found the CIT(A)'s order to be reasoned and conclusive, with no new cogent material presented by the revenue to take a different view. The decision was pronounced in the open court on 23.08.2024.

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