TMI Blog2016 (6) TMI 299X X X X Extracts X X X X X X X X Extracts X X X X ..... estment was made in violation of mode prescribed under Section 11(5) of the Act. Since the investment was made in violation of statutory provision, this Tribunal is of the considered opinion that the assessee-institution violated the statutory provision at the initial stage itself. Therefore, it is not entitled for approval under Section 10(23C)(vi) of the Act. - Decided against assessee. - ITA No. 1907/Mds/2015 - - - Dated:- 1-6-2016 - Shri N. R. S. Ganesan, Judicial Member And Shri A. Mohan Alankamony, Accountant Member For the Appellant : Sh. R. Vijayaraghavan, Advocate For the Respondent : Sh. Sundar Rao, CIT ORDER Per N. R. S. Ganesan, Judicial Member This appeal of the assessee is directed against the order o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ya Israel Ltd. was changed from a profit organization to a non-profit organization. Hence, according to the Ld. counsel, it cannot be said that the educational institution of the assessee exists solely for the profit. 3. Referring to third proviso to Section 10(23C) of the Act, the Ld.counsel for the assessee submitted that the assessee was expected to apply its income or accumulate the same wholly and exclusively towards its objects for which it was established. Placing reliance on the judgment of Apex Court in American Hotel Lodging Association Educational Institute v. Central Board of Direct Taxes (2008) 301 ITR 86, the Ld.counsel submitted that Section 10(23C)(vi) of the Act does not require the assessee to apply its income in Indi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... application of income outside the country. According to the Ld. D.R., the Income-tax Act is applicable only within the territorial jurisdiction of India and its application cannot be extended outside the territorial jurisdiction of India. If the exemption provided under Section 11, 12 or 10(23C) of the Act is extended to application of income outside the country, then it would defeat the very purpose for which the exemption was granted. According to the Ld. D.R., The Indian taxpayer s money cannot be allowed to be invested or diverted outside the country in the guise of application for charitable purpose. Therefore, according to the Ld. D.R., the income has to be applied only in India. On a query from the Bench, when the Supreme Court held ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on three grounds (i) the assessee-company applied its funds outside the country; (ii) the assessee invested funds in the equity shares of the subsidiary company; and (iii) the assessee-company exists for profit motive. The Apex Court in American Hotel Lodging Association Educational Institute (supra) examined the provisions of Section 10(23C)(vi) of the Act elaborately and found that third proviso to Section 10(23C)(vi) of the Act confines the words application of income to the objects for which the institution was established and it does not use the words in India for accumulation of income. The assessee before the Apex Court is a foreign entity established educational institution in India. Therefore, the Apex Court found that the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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