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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 ..... unsel for the assessee, submitted that the assessee is an educational institution applied for approval under Section 10(23C)(vi) of the Act. The Ld.counsel further submitted that the assessee-institution exists solely for the education purpose and not for the purpose of profit. The Chief Commissioner rejected the application of the assessee on the ground that the assessee invested in 10,000 equity shares of a wholly owned subsidiary company, namely, Karunya Israel Ltd., Israel, contrary to third proviso to Section 10(23C) of the Act. The Chief Commissioner has also found that the funds of the assessee were not invested in India and it was invested in Israel. According to the Ld. counsel, in order to set up a Liaison Office in Jerusalem, Isr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10(23C)(vi) of the Act clearly says application of income to the object for which the institution was established and does not use the word "in India". In the absence of the word "in India" in Section 10(23C)(vi) of the Act, the Chief Commissioner cannot import the word "in India" while reading the third proviso Section 10(23C)(vi) of the Act. According to the Ld. counsel, Section 10(23C)(vi) of the Act does not require application of income in India, therefore, merely because the assessee applies its income at Jerusalem at Israel that does not stand in the way of granting approval under Section 10(23C)(vi) of the Act. 4. On the contrary, Shri Sundar Rao, the Ld. Departmental Representative, submitted that the assessee is an educational i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Tribunal. The Ld. D.R. further submitted that admittedly the funds of the assessee were invested in equity shares of the subsidiary company at Israel. The company was held by the assessee's educational institution. Therefore, it is a violation of third proviso to Section 10(23C)(vi) of the Act. The Ld. D.R. further submitted that what is prohibited under proviso to Section 10(23C) of the Act is investment in foreign company. Since the assessee-institution invested the funds in the company other than the mode prescribed in Section 11(5) of the Act, the assessee is not entitled for approval under Section 10(23C) of the Act. Referring to Section 11(5) of the Act, the Ld. D.R. submitted that the funds of the educational institution have to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of decision at the time of assessment. In the case before us, the assessee is an Indian institution investing its funds generated out of its charitable activity in India, outside the country. The Indian Income-tax Act provides for accumulation of its surplus funds to the extent of 15% and also provides the method of investment. 6. The question arises for consideration is whether the assessee-institution can invest any part of its accumulated income or the current income on the equity of non-resident subsidiary company and claim exemption as application of income? Apparently, this issue was not the subject matter of discussion before the Apex Court in American Hotel & Lodging Association Educational Institute (supra). However, the fact rem ..... X X X X Extracts X X X X X X X X Extracts X X X X
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