Domestic scholarship payments for foreign study do not amount to income application outside India, supporting charitable registration.

Scholarships paid in India to Indian students for higher studies abroad were treated as domestic disbursements, not as application of income outside India, because no amount was remitted to a foreign university or institution; the later use of funds abroad did not attract section 11(1)(c). On that footing, the charitable and educational objects, supported by audited accounts and filed forms, justified registration under section 12AB and consequential approval under section 80G. The note concludes that the rejection of registration and the connected denial of approval were unsustainable on these facts.

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Issues: (i) Whether scholarships disbursed in India to Indian students for pursuing higher studies abroad amount to application of income outside India so as to attract section 11(1)(c) of the Income-tax Act, 1961 and justify al of registration. (ii) Whether, on the facts found, the assessee was entitled to registration under section 12AB and consequential approval under section 80G.

Issue (i): Whether scholarships disbursed in India to Indian students for pursuing higher studies abroad amount to application of income outside India so as to attract section 11(1)(c) of the Income-tax Act, 1961 and justify refusal of registration.

Analysis: The scholarships were paid in India, in Indian currency, directly to the students or their guardians, and no amount was remitted to any foreign university or institution. The mere fact that the students later used the assistance for studies abroad did not convert a domestic disbursement into an application of income outside India. The bar in section 11(1)(c) applies where income is applied for purposes outside India, which was not the position on the facts found.

Conclusion: Section 11(1)(c) was not attracted, and the scholarship activity could not be treated as application of income outside India.

Issue (ii): Whether, on the facts found, the assessee was entitled to registration under section 12AB and consequential approval under section 80G.

Analysis: The assessee's objects were charitable and educational, the scholarship activity was held to be within the permitted charitable framework, and the record showed a long charitable history with audited accounts and the requisite forms filed. Since the principal reason for rejection did not survive, the consequential refusal under section 80G also could not stand.

Conclusion: Registration under section 12AB was directed to be granted, and approval under section 80G was also directed to be allowed.

Final Conclusion: The assessee succeeded in both appeals, and the rejection of registration as well as the connected denial of approval were set aside.

Ratio Decidendi: Scholarships paid in India to Indian students for foreign study are not, by that fact alone, an application of income outside India; where the underlying activity remains charitable and educational, denial of registration on that ground is unsustainable.

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