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TMI Blog2016 (6) TMI 977X X X X Extracts X X X X X X X X Extracts X X X X ..... % and also provides the method of investment. The assessee invested its funds in the equity shares of a company incorporated outside India. The third proviso to Section 10(23C) of the Act clearly says that the assessee cannot invest in the equity shares of any company and the investment has to be made only as per the mode prescribed under Section 11(5) of the Act. In this case, the investment was made in violation of mode prescribed under Section 11(5) of the Act. Since the investment was made in violation of statutory provision, this Tribunal is of the considered opinion that the assessee-institution violated the statutory provision at the initial stage itself. Therefore, it is not entitled for approval under Section 10(23C)(vi) of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty by Trust or individual, therefore, the assessee was forced to form a company by name Karunya Israel Ltd. At the time of incorporation on 12.05.2011, the company was incorporated as a profit organization. Subsequently the company was changed to a non-profit organization and a fresh certificate of incorporation was issued on 04.05.2015. Therefore, according to the Ld. counsel, Karunya Israel Ltd. was changed from a profit organization to a non-profit organization. Hence, according to the Ld. counsel, it cannot be said that the educational institution of the assessee exists solely for the profit. 3. Referring to third proviso to Section 10(23C) of the Act, the Ld.counsel for the assessee submitted that the assessee was expected to apply ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee has invested its funds in equity shares of a wholly owned subsidiary company incorporated at Israel. According to the Ld. D.R., Indian Income-tax Act provides exemption in respect of income earned by Indian resident on its application for charitable purpose, either under Section 11, 12 or 10(23C) of the Act. It is not the intention of the Parliament to give exemption for application of income outside the country. According to the Ld. D.R., the Income-tax Act is applicable only within the territorial jurisdiction of India and its application cannot be extended outside the territorial jurisdiction of India. If the exemption provided under Section 11, 12 or 10(23C) of the Act is extended to application of income outside the country ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any outside the country is not one of the modes prescribed under Section 11(5) of the Act. Therefore, according to the Ld. D.R., the assessee is not entitled for approval under Section 10(23C) of the Act. 5. We have considered the rival submissions on either side and perused the relevant material available on record. The Chief Commissioner rejected the application of the assessee on three grounds (i) the assessee-company applied its funds outside the country; (ii) the assessee invested funds in the equity shares of the subsidiary company; and (iii) the assessee-company exists for profit motive. The Apex Court in American Hotel Lodging Association Educational Institute (supra) examined the provisions of Section 10(23C)(vi) of the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ird proviso to Section 10(23C) of the Act clearly says that the assessee cannot invest in the equity shares of any company and the investment has to be made only as per the mode prescribed under Section 11(5) of the Act. In this case, the investment was made in violation of mode prescribed under Section 11(5) of the Act. Since the investment was made in violation of statutory provision, this Tribunal is of the considered opinion that the assessee-institution violated the statutory provision at the initial stage itself. Therefore, it is not entitled for approval under Section 10(23C)(vi) of the Act. 7. In view of the above discussion, this Tribunal do not find any reason to interfere with the order of the lower authority and accordingly t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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