ITAT: Scholarship Paid in India for Foreign Studies Is Not Application of Income Outside India

Shila Ashok Shah Foundation filed an application seeking registration under Section 12AB of the Income Tax Act. During verification, the CIT (Exemptions) noted that the trust had granted Rs. 4,00,000 in Indian currency to an Indian student for pursuing higher education at Brunel University, London.

Treating this as an application of income outside India, the CIT(E) rejected the registration application, holding it to be in violation of Section 11(1)(c). The trust also faced a delay of 265 days in filing its appeal before the Tribunal, which was supported by an affidavit explaining the circumstances.

Main Issue: Whether educational assistance granted in India to an Indian student for studies abroad amounts to application of income outside India, justifying rejection of registration under Section 12AB.

ITAT’s Order: The ITAT first condoned the delay of 265 days, noting the absence of any mala fide intent and relying on settled principles that substantial justice must prevail over technicalities. On merits, the Tribunal observed that the grant was paid in India, in Indian currency, directly to the student, and not to the foreign university.

Relying on Jamshedji Tata Trust, the ITAT held that mere utilisation of funds abroad by the beneficiary does not amount to application of income outside India. The rejection of registration was therefore held to be unsustainable. The matter was remanded to the CIT(E) for fresh consideration in line with the settled legal position, and the appeal was allowed.

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