The end of the inlet tube is where the bubbles of CO2 enter the liquid, so it has to be under the liquid surface. And, it should be far enough below the liquid surface that you can easily see the bubbles rising thru the liquid. Bubble counters are an extremely simple device - all they do is allow the CO2 to bubble up thru a liquid so you can see the bubbles. Nothing more complicated than that.

The CO2 outlet in the bubble counter needs to always be above the liquid level to keep liquid from being sucked up the outlet after the CO2 is shut off. The remaining CO2 in the outlet tubing above the bubble counter will continue to dissolve into the aquarium water, allowing aquarium water to go down that tubing, so a check valve is needed between the bubble counter outlet and the aquarium, to allow flow only towards the aquarium.