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Scholarships Paid in India Not Foreign Spending, ITAT Delhi Rules for Oxonian Foundation
The of the has delivered a significant in favor of , setting aside the that denied the foundation's registration under and approval under of the . The tribunal held that scholarships disbursed in India to Indian students—even if those students later pursue studies abroad—do not constitute under . The decision provides crucial clarity for charitable organizations that support Indian students' overseas education through scholarships paid domestically.
The Foundation and Its Registration Journey
, a incorporated in , has charitable objects centered on education, research, training, skill development, and higher education. Its activities include granting scholarships and financial assistance to students pursuing higher education either in India or abroad. The foundation initially secured registration under in , later obtaining fresh registration under (1)(ac)(i) for assessment years . When it applied for continuation of registration from assessment year under (1)(ac)(ii) and simultaneously sought approval under —which allows to for to approved charitable organizations—the CIT(E) rejected both applications.
CIT(E)'s Objections: Foreign Spending and Selection Criteria
The CIT(E) raised two principal objections. First, it contended that although the scholarship amounts were transferred to students in India, the funds were ultimately utilized for studies abroad. This, according to the Commissioner, brought the payments within the ambit of , which deals with charitable income applied to outside India. Second, the CIT(E) questioned the . It noted the involvement of , in shortlisting and selecting recipients, and pointed to the absence of clearly defined . Additionally, the Commissioner highlighted that had received scholarships for both a BCL and an MPhil course at Oxford, suggesting possible irregularity. The CIT(E) also flagged made to , where a director of was a , raising concerns under regarding the use of charitable income for the benefit of .
ITAT's Reasoning: A Firm Rejection of the Commissioner's Approach
The ITAT bench, comprising Judicial Member Raj Kumar Chauhan and Accountant Member Amitabh Shukla, found no merit in the CIT(E)'s reasoning. The tribunal relied heavily on its earlier decision in
, a case involving similar facts. It observed that where scholarships are disbursed in India to Indian students in Indian currency through banks, the subsequent travel of the student abroad does not convert the payment into an
.
"Admittedly, there is no dispute that the funds are being utilized on the scholarships to the Indian students and amount is also being remitted in India through banks in Indian currency,"
the tribunal noted, underscoring that the primary object of the trust—education—was being fulfilled.
The ITAT further held that the CIT(E) had overstepped its role by venturing into the arena of assessment while deciding the foundation's registration and approval applications. The inquiry under
is confined to the
and
. The tribunal found no material on record to suggest that
had failed on either count.
"Therefore, respectfully relying upon the case of judicial tribunal, we are of the considered opinion that the ld. CIT(E) has unjustifiably denied the registration on the ground that scholarship amount is being utilized for the studies of Indian students abroad and further that the selection criteria of the scholarship is not transparent and justified,"
the
read.
Distinguishing Registration from Assessment
A key aspect of the judgment is the clear demarcation between the and the . The ITAT emphasized that issues such as the application of income under or the applicability of concerning are matters for detailed scrutiny during , not at the . By invoking these provisions to deny registration, the CIT(E) had effectively without affording the taxpayer an opportunity to present its case in the proper forum. The tribunal also noted that the consultancy payments to , even if they involved a director as a partner, could be examined during assessment, but did not warrant a blanket denial of .
and Impact on Charitable Sector
The ITAT's reliance on Oxford Cambridge Society of India reinforces a : scholarships paid in India to Indian students, even for overseas studies, are not treated as foreign application of income. This interpretation is vital for charitable organizations that fund Indian students' international education—a common philanthropic activity. The also sends a strong message to tax authorities not to conflate registration inquiries with assessment-level investigations. The CIT(E) must focus on the genuineness of the organization's activities and its compliance with basic legal requirements, rather than engaging in .
Conclusion and
The ITAT set aside the CIT(E)'s in its entirety and directed the Commissioner to grant the foundation registration under (1)(ac)(ii) and the corresponding approval within four weeks. Both appeals filed by were allowed. The decision provides much-needed certainty for charitable entities navigating the intersection of domestic scholarship disbursements and international education, and reinforces the principle that the tax department must not at the .
For legal professionals, the case serves as a useful when challenging denials of based on perceived foreign application of income. It also highlights the importance of maintaining clear documentation of scholarship selection processes to preempt objections regarding transparency. As the charitable sector continues to support global education, this judgment will likely be cited frequently in similar disputes.
