cpc

stipend income

Professional

doctor pursuing his post grad. from a medical clg and received stipend for the A.Y.11-12 amounts to 2.10lac. is he is liable to pay tax? if not, how he show the income in which ITR?

pls reply

 
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FIN

Kindly look into the following:

Decided by: ITAT, CHANDIGARH BENCH `SME-B’, In The case of: Dr. Rahul Tugnait v.ITO, appeal No. :ITA NO. 197/CHD/2008, Decided on: JUNE 30, 2008

Section 16 of the Act speaks about deduction from salaries whereas section 17 speaks about “salary”, “perquisite” and “profits in lieu of salary” etc. A conjoint reading of section, 15, 16 and 17 nowhere includes scholarship/ stipend which have been mentioned in section 10(16) of the Act. Therefore, it can be said that the stipend/scholarship has been specifically precluded from the mischief of sub clause (1) & (2) of section 17 of the Act.

If the aforesaid sections are analyzed by keeping them in juxtaposition, it can be said that it is neither a salary/wages nor perquisite.

“Scholarships granted to meet the cost of education [cl.(16)] – Clause (16) exempts the /scholarships granted to meet the cost of education.

The considerations which make up the concept of a “Scholarship for meeting the cost of education” in s. 10(16} are that the payment is intended to be an income receipt in the hands of the scholar and that whatever is paid is intended to meet the cost of education of the recipient. Since the purpose of the payment is to meet the cost of education, the question whether the quantum of payment is adequate or inadequate, or, is or is not in excess of the requirements are all beside the point. It is enough if the whole object of the payment is to meet the cost of education of a person and no further enquiry is called for in order toe exclude the amount form the taxable income u/s 10(16). If the payment is only for the cost of education the fact that the recipient does not spend the whole of the amount or saves something out of it or utilizes it for other purposes would not detract from the character of the payment being one for scholarship.

Viewed from aforesaid different angles and facts of the present appeal. It can be said that the scholarship/ stipend received by a student from College/Govt for pursuing higher studies, cannot be termed as salary. Therefore, this appeal of the assessee is allowed.

 

 Valuable advice of learned experts/members is sought.

 

 

 

 



Attached File : 780491221 income tax on stipend.doc downloaded 1492 times

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Professional

Thank You for your reply & Advice.

now how can I show the stipend income in the ITR, in which ITR? ITR1 or ITR4? in ITR1, there is no scope to show income received u/s10, where as in ITR4 there is a row to show that type of income under salary head. please guide me.

 
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Advocate

Under Section 10(16) of the Income-tax Act, any scholarship granted to a person to meet the cost of education is exempt from tax. The term ‘scholarship’ should be interpreted liberally and it would also include within its scope and ambit, amounts of fellowships, stipends, grants for travel and incidental expenses, etc. awarded for acquiring education.

 

An interesting question that would arise for consideration is in regard to taxability of a scholarship, where the recipient has not spent the whole amount. The Madras High Court, in the case of ‘CIT vs. V.K. Balachandran’ 147 ITR 4, had occasion to consider this very issue. The High Court held that where the purpose of payment of scholarship is to meet the cost of education, the question whether the quantum of payment is adequate or inadequate, or, is or is not in excess of the requirement is beside the point. It is enough if the whole object is to meet the cost of education of a person and no further enquiry is called for in order to exclude the amount from the taxable income under Section 10(16).

 

In this case, the taxpayer, a professor of mathematics was awarded grant-in-aid by a foreign university for doing advance research in the field of mathematics. The Court held that the fact that the recipient does not spend the whole of the amount or saves something out of it or utilizes for other purposes would not detract from the character of the payment being one for scholarship and accordingly exempt from tax.

 

 

 

In another case of ‘A. Ratnakar Rao vs. Addl. CIT’ 128 ITR 527, the Karnataka High Court had occasion to consider whether the trainee’s stipend granted to a physician to further his education and training was exempt under Section 10(16). The Income-tax Department took the view that the amount received by the taxpayer was not in the nature of scholarship, but it was salary for the services rendered.

 

The High Court held that the amount paid to the taxpayer was for the benefit of securing training and pursuing study and research in medicine and the entire amount received from the hospital was in the nature of scholarship and not for services rendered and services, if any, rendered by the taxpayer were only incidental to the course of practical training.

 

Similarly, the Income-tax Appellate Tribunal, Jaipur Bench has in the case of ‘Sudhirkumar Sharma vs. ITO’ 17 TTJ 226, held that the stipend received by an Article Clerk from a Chartered Accountant is exempt, since it is not paid for rendering services by the Article Clerk, but is paid to him to meet the cost of books, coaching fee, examination fee, etc.


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FIN

Learned Mr.Vishal has given valuable advice and has enriched the forum.

Kindly confirm if the recipient of stipend has to file the IT return or not? If the amounts exceed taxable limits or even if the amount is within/below taxable limits?

If yes, under which head "IFOR" or salary/wages and which form is to be used ITR 1 or 4?


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