ITAT Mumbai Clarifies: Indian Scholarships for Foreign Education Do Not Violate Section 11(1)(c)

Background of the Dispute

The case of Jhaverbhai Patel Research Centre Vs CIT (Exemption) came before the ITAT Mumbai as an appeal against an order dated 27.09.2025 passed by the Commissioner of Income Tax (Exemptions) [“CIT(E)”]. The order had rejected the assessee’s application in Form 10AB seeking regular registration under Section 12AB of the Income Tax Act, 1961.

The CIT(E) had examined:

  • The completeness and validity of the Form 10AB application
  • Compliance with the procedural timelines under Section 12A(1)(ac)(v)
  • The nature of the assessee’s objects and activities in light of Section 11
  • Specifically, a scholarship payment related to higher education abroad, alleged to trigger Section 11(1)(c)

The assessee challenged the rejection, contending that both on facts and law, the denial of registration was unjustified.

Proceedings Before the CIT(E)

Incomplete Application and Call for Information

On scrutiny of Form 10AB, the CIT(E) concluded that the filing was not accompanied by all the documents mandated under Rule 17A(2).

Accordingly:

  1. A notice dated 03.07.2025 was issued under the ITBA system seeking:

    • Complete documentation as prescribed by Rule 17A(2)
    • Clarification and supporting documents regarding the trust’s objects and activities

  2. The assessee responded vide online submission dated 14.07.2025.

On perusal of the trust deed / MOA, the CIT(E) noticed that clauses 3(10), 3(12) and 3(16) allowed the assessee to apply funds outside India. The CIT(E) treated this as contrary to Section 11 of the Income Tax Act.

Amendment of Objects and Limitation under Section 12A(1)(ac)(v)

The trust had undertaken modification of its objects and the Charity Commissioner had approved the amendment by judgment dated 29.11.2024. In such a situation, the assessee’s application for registration was governed by Section 12A(1)(ac)(v), which stipulates:

where the trust or institution has adopted or undertaken modification of the objects which do not conform to the conditions of registration, within a period of thirty days from the date of said adoption or modification;

On this basis, the CIT(E) reasoned:

  • The 30-day limit from 29.11.2024 expired on 28.12.2024
  • However, the assessee filed Form 10AB on 04.02.2025, resulting in a delay of 38 days
  • A show cause notice dated 04.09.2025 was issued, and financial statements, bank statements and proof of expenditure were also called for

Initially, there was no response, prompting a final reminder dated 13.09.2025. The assessee then replied on 17.09.2025.

Condonation of Delay

In its reply, the assessee submitted that:

  • The order of the Charity Commissioner dated 29.11.2024 was actually received only on 17.01.2025 because the Joint Charity Commissioner was on leave
  • Form 10AB filed on 04.02.2025 was thus within 30 days from the date of receipt and the delay of 38 days (reckoned from the date of order) was not deliberate

The CIT(E) accepted this explanation and condoned the delay of 38 days, holding the cause to be reasonable.

Amendment of Object Clauses

Regarding the clauses enabling application of funds outside India, the assessee produced:

  • A board / executive committee resolution dated 11.09.2025 amending those clauses
  • A copy of the application submitted to the Charity Commissioner for approval of such amendment

The CIT(E) accepted that the assessee had taken corrective steps and treated this objection as resolved.

Scholarship Payment and Alleged Violation of Section 11(1)(c)

On further examination of the documents filed by the assessee along with the reply dated 17.09.2025, the CIT(E) noticed that:

  • An amount of Rs. 2,00,000/- had been paid to Ms. Annushree Ajitkumar
  • The purpose was for study at Washington University and St. Louis School of Medicine

The CIT(E) proceeded on the premise that: