Scholarship for Foreign Studies & Condonation of Delay in Section 12AB Registration

By | February 18, 2026
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Scholarship for Foreign Studies & Condonation of Delay in Section 12AB Registration

1. Core Dispute: Scholarship as “Application Outside India”

The Assessing Officer (AO) rejected the trust’s application for registration under Section 12AB on the grounds that the trust violated Section 11(1)(c). The violation was alleged because the trust provided a ₹2 lakh scholarship for a student to study at a foreign university (Washington University).

  • The AO’s Contention: Providing funds that are ultimately paid to a foreign university constitutes applying funds outside India, which requires specific CBDT approval under Section 11.

  • The Assessee’s Defense: The scholarship was paid in Indian Rupees (INR) to an Indian citizen within the territory of India. The subsequent remittance of those funds by the student to the foreign institution was a private action and did not change the character of the trust’s domestic application.

2. Legal Analysis: What Constitutes “Application in India”?

The Tribunal clarified the geographical boundaries of “application of income” for charitable purposes.

  • Geographical Location of Payment: For the purpose of Section 11, the “application” is complete once the trust parts with the funds. Since the scholarship was disbursed in India, in local currency, to an Indian beneficiary, the application occurred within India.

  • Beneficiary Benefit: Promoting the education of an Indian citizen, even if the training occurs abroad, is a charitable purpose that benefits the Indian public.

  • Settled Principle: The Tribunal relied on the precedent set in cases like Jamshedji Tata Trust, holding that financial assistance to Indian students for foreign education does not violate the condition of application “in India.”

3. Condonation of Delay in Application

The trust filed its registration application with a 38-day delay.

  • Reasonable Cause: The trust argued that while the order was dated earlier, it was only served on 17-01-2025, and the application was filed on 04-02-2025 (within 30 days of receipt).

  • Substance over Form: The Tribunal noted that the delay was minor and lacked mala fide intent. Following the principle that “technicalities should not defeat substantial justice,” the delay was condoned.

4. Final Ruling: Remand to CIT(A)

The Tribunal set aside the rejection order and remanded the matter to the Commissioner (Appeals)/CIT (Exemptions).

  • Verdict: The scholarship is a valid domestic application of income.

  • Directive: The authority must reconsider the trust’s registration application on its merits, treating the application as filed within the permitted timeline.

Key Takeaways for Charitable Trusts

  • Mode of Payment: Always disburse scholarships to Indian students in INR and maintain records of their Indian Citizenship (Passport/Aadhar) to avoid “foreign application” allegations.

  • Service of Orders: Keep proof of the date of receipt of any order (like a screenshot of the portal or an email timestamp), as the limitation period for appeals and applications often starts from the date of service, not just the date of the order.

  • Condonation Window: Under the Finance Act 2024 (effective October 1, 2024), Commissioners now have specific statutory powers to condone delays in Form 10AB/10A applications if “reasonable cause” is shown.

IN THE ITAT MUMBAI BENCH ‘F’
Jhaverbhai Patel Research Centre
v.
Commissioner of Income-tax (Exemption)*
Pawan Singh, Judicial Member
and ARUN KHODPIA, Accountant Member
IT Appeal No. 7359 (Mum) of 2025
JANUARY  27, 2026
Biren Gabhawala, AR for the Appellant. Vivek Perampurna, CIT-DR for the Respondent.
ORDER
Arun Khodpia, Accountant Member.- The instant appeal is filed by the assessee, challenging the order of Commissioner of Income Tax (Exemption) [for short “ld. CIT(E)”] dated 27.09.2025, rejecting the application of assessee in Form 10AB for grant of registration under section 12AB of the Income Tax Act, 1961 (the Act). The grounds of appeal raised by the assessee are as under:
1. “On the facts and in the circumstances of the case and in law, the learned Commissioner of Income-tax (Exemptions) has erred in rejecting the application seeking amendment to the Trust Deed, by considering payment for scholarship to Indian Resident and paid in India, for higher education of higher medical studies outside India, as a violation of provisions of section 11(1) (c) of the Income Tax Act, 1961.”
2. At the outset, the ld. Authorized Representative (AR) on behalf of the assessee, submitted that the assessee’s application in form 10AB dated 04.02.2025 for registration under section 12AB has been considered by the Ld. CIT(E). Requirement of sub rule (2) of Rule 17A are discussed, response made by the assessee are taken on record and after deliberations, ld. CIT(E) has observed as under:
“3. On verification of the application in Form 10AB filed by the applicant, it was found that the application was not complete, and all the documents required to be accompanying the application were not furnished. Hence, a notice was issued to the applicant vide DIN & Notice No. ITBA/EXM/F/EXM43/2025-26/1078144948(1) dated 03.07.2025 requesting the applicant to furnish the complete set of documents mentioned in Rule 17A(2). In response, the applicant made submission online vide letter dated 14.07.2025. After a careful perusal of the submission, it is seen from the trust deed/MOA that as per point 3(10), 3(12) and 3(16) of the objects of the trust deed/MoA, the applicant intends to apply fund outside India. This is in violation of section 11 of the Income tax Act.
Further, it is seen that the Trust has undertaken modification of the objects ad the application is filed under clause (v) of section 12(1)(ac) of the Act. As per section 12A(1)(ac)(v) of the Income tax Act: 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;
As the amendment in trust deed was approved by the Charity Commissioner vide judgement dated 29.11.2024. Thus as per above provision, application in Form 10AB for should be filed within 30 days i.e. 28.12.2024. However, the Trust has filed application in Form 10AB for regularization of provisional registration order u/s 12A on 04.02.2025 1 after a delay of 38 days which is not valid as per the above provisions.
In view of this, a show cause notice was issued to the applicant vide DIN & Notice No. ITBA/EXM/F/EXM43/2025-26/1080344625(1) dated 04.09.2025 and explanations were called for regarding the above-mentioned violations. Additionally, information like proof of expenses on the objects of the trust alongwith copy of bank statement and financial statement were called for vide the same notice dated 04.09.2025. However, no response was received in this regard. Again, a final opportunity was provided DIN & Notice No. ITBA/EXM/F/EXM43/2025-26/1080702139(1) dated 13.09.2025 to comply with the terms of notice dated 04.09.2025. In response, applicant has filed its submission vide letter dated 17.09.2025.
4. Regarding the issue of delay in filing of application, the applicant has stated that the
Charity Commissioner order dated 29.11.2024 was received by the applicant on 17.01.2025 as the Joint Charity Commissioner was on leave, Applicant has further requested for condonation of delay of 38 days in filing of application. The contention of the applicant is found acceptable and hence, the delay of 38 days in filing of application is condoned.
4.1 Regarding the issue of violation of provision of section 11 of the Act, applicant has passed a resolution amending the said clauses which is in violation of provisions of section 11. Applicant has also submitted a copy of application for amendment of said clauses before the Charity Commissioner. The contention of the applicant in this regard is acceptable as applicant has itself rectified the clauses in violation.
4.2 On further perusal of the submission dated 17.09.2025, as per the documentary evidences regarding the expenses incurred by the trust on objects of the trust, it was seen that the applicant has made expenses to the tune of Rs. 2,00,000/- paid to Annushree Ajitkumar for studies in Washington University and St. Louis School of Medicine. As such expenditure is incurred outside India thus provisions of section 11(1)(c) of the Act, are attracted. Therefore, in view of the same, approval order from the Board received by the trust for expenditure incurred outside India, as mandated by proviso to section 11(1)(c) of the Act was called for from the applicant vide DIN & Notice No. ITBA/EXM/F/EXM43/2025-26/1080944436(1) dated 19.09.2025.
4.3 In response, the applicant filed its submission vide letter dated 22.09.2025, wherein it enclosed a bank statement evidencing the payment of 2,00,000/- made to Ms. Annushree Ajitkumar. The applicant has contended that the said amount was paid to her in Indian Rupees (INR), and thereafter, Ms. Annushree Ajitkumar remitted the equivalent amount in US Dollars (USD) to Washington University as tuition fees.
However, the applicant has failed to furnish any order from the Board granting approval for such expenditure outside India. This omission implies that no prior approval was obtained from the Board before incurring the said expenditure.
Furthermore, as per the applicant’s own submission, the payment was made in USD by Ms. Annushree Ajitkumar, while the donation was initially made to her by the Trust. Therefore, in accordance with the provisions of Section 11(1)(c) of the Income Tax Act, the Trust was required to obtain prior approval from the Board before incurring such expenditure outside India.
In light of the above, it is concluded that the applicant has violated the provisions of Section 11(1)(c) of the Act.
5. Since registration under section 12AB is to be granted in terms of the provisions of section 12AB(1)(b) of the Act after being satisfied about the objects of the trust or institution, the genuineness of activities, and the compliance of any other law for the time being in force as are material for the purposes of achieving its objects. In view of the violation mentioned above, the undersigned is left with no other option but to reject the application seeking registration under section 12AB of the Act. However, the applicant is at liberty to pursue the remedies available in Statute, without any prejudice.
6. In the view of the above, the application for regularization of provisional registration in Form 10AB filed by the assessee is not allowable on the ground of violation of provisions of section 11. In conclusion, this application for grant of registration stands rejected.”
3. Referring to the aforesaid observations of ld. CIT(E), ld. AR submitted that the observations of ld. CIT(E) are not lawful, being misconceived in terms of the provisions of Act, as well as the facts of the case. To substantiate the aforesaid contentions the ld. AR took us to page 37 of the assessee’s Paper Book (PB) containing therein the reply of assessee to ld. CIT(E), that the order passed by Charity Commissioner dated 29.11.2024 was received by the assessee’s society only on 17.01.2025, thus the application for grant of registration under section 12AB, which was filed on 04.02.2025 was within 30 days of reply of aforesaid order. Regarding Clause-3(10), 3(12) & 3(16) of the objects of the Trust-deed/MOA, the assessee intends to apply funds outside India, the assessee had passed a resolution in its Executive Committee on 11.09.2025, amending the said Clause. (copy enclosed in the PB page 1-16). Further such Clause were there in the MOA of the assessee society since 1976, but were never used / undertaken through any activity falling under the scope of such objects. It is thus submitted that there was no alleged violation of the provisions of section 11 of the Income Tax Act, 1961. Regarding the expenditure towards the activities for the Financial Year (FY) 2024-25, the assessee society has donated Rs. 2,50,000/- towards education expenses for Dr. Anand Gokani Rs. 50,000/- and for Ms. Annushree Ajit Kumar Rs. 2,00,000/-. The documents pertaining to such payments were also furnished in the PB before us according to which the payment of Rs. 2,00,000/- to Ms. Annushree Ajit Kumar for study in Washington University was made, paid to her in Indian rupees in her bank account and thereafter remitted by her in equivalent USD under her own arrangements, but was wrongly construed by ld. CIT(E) as expenditure incurred outside India.
4. The ld. AR submitted that all the aforesaid issues were duly explained by assessee before the ld. CIT(E), however those were treated as violation to the provisions of section 11(1)(c) of the Act and based on such observations, the application of assessee was rejected. It was the prayer that there was no violation on the part of assessee under provisions of section 11(1)(c) of the Act, the clauses which needs amendment are also acted upon by the Executive Committee of assessee society for necessary amendments, further argued that the scholarship to Indian resident paid in India for higher education outside India, should not be treated as payment made outside India. Reliance was placed on R. Mangaldas Charitable Trust v. CIT (Exemptions) (Mumbai – Trib.)/ITA No.17/MUM/2025 dated 31.10.2025 and ITA 7006/Mum/2013 in the case of Jamsetji Tata Trust v. Joint DIT (Exemption) (Mumbai)/[2014] 148 ITD 388 (Mumbai)/Mumbai vide order dated 26.03.2014. It is submitted that, the decision of ld. CIT(E) was not in accordance with the provisions of law, the same is liable to be set-aside and be direct to allow the assessee’s registration under section 12AB of the Act.
5. Per contra, ld. CIT-DR vehemently supported the order of ld. CIT(E).
6. We have considered the rival submissions perused the material available on record. Admittedly in present case the application of assessee in Form 10AB was furnished with a delay of 38 days for which it is submitted by the assessee that the order was served to them on 17.01.2025 and the application was filed within 30 days from receipt of the said order. Regarding the issue of delay Hon’ble Bombay High Court in the case of Columbia Global Center in India v. ITO (Exemptions) (Bombay)/on 7 October, 2025, WRIT PETITION (L) NO. 23170 OF 2025, had held that, “the approach of the authority ought to be equitious, balancing and judicious and availing of exemption should not be denied merely on the bar of limitation. This is more so when the Legislature has, under Section 119(2)(b) of the Act, conferred discretionary powers to condone the delay on the authorities concerned with a view to avoid genuine hardship.”, we, thus, are of the opinion that, the delay of 38 days, that too explained, to be on account of delay in receipt of Order from Charity Commissioner, the assessee should not be penalized for that, even otherwise the authority needs to adopt a liberal and justice oriented approach to while condoning the delay. We this direct to condone the delay in filing of for 10AB in present case.
7. On other issues, which forms the belief of Ld. CIT(E) to reject the application of assessee, that the payment in India for study outside India does equate to payments / expenses incurred outside India, does not inspire any confidence, particularly when the scholarship is granted to an Indian citizen in Indian rupees. This issue was decided ITAT Mumbai in the case of R. Mangaldas Charitable Trust, Mumbai (supra), observing that, “if the scholarship is granted by a charitable institution in accordance with their objects, whereby such financial assistance is provided in India in Indian rupees and that too, to Indian student, such application of income will happen for educational purposes in India. The financial assistance so provided will be utilized by students for abroad cannot be read and understood as providing financial assistance outside India and consequent upon application of income outside India. Assessee trust also taken necessary steps to amend the objects of trust to put at rest any doubts in this respect.” The facts of the present matter, being identical to facts of aforesaid case of R. Mangaldas Charitable Trust (supra), in absence of any distinguishing fact, we find no merits in the decision of Ld. CIT(E) in treating the grant of financial assistance to Ms. Annushree AjitKumar in India, to be an expenditure incurred out side India. We, thus, direct the same to be treated as a permissible action by the trust and not in violation of section 11(1)(c) of the Act. A similar issue raised in the appeal in ITA 7006/Mum/2013 in the case of Jamsetji Tata Trust Mumbai vide order dated 26.03.2014 (supra), the tribunal holds that, education grant given to the Indian students in India for education / higher education abroad fulfils the conditions of application of money for such purpose in India.
8. In backdrop of the aforesaid facts, circumstances and decisions, which could not be contradicted by the revenue, we deem it appropriate to restore this matter back to the file of Ld. CIT(E) to revisit / reconsider the application of assessee in for 10AB for grant of registration u/s 12AB and decide the same om merits of the case.
9. In result, impugned order of Ld. CIT(E) is set aside and the appeal of assessee is allowed for statistical purposes, in accordance with our observations as indicate above.