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September 2010

S. 10(16) — Scholarship/stipend paid to assessee — Whether can be termed as salary — Held, No. The same is exempt u/s.10(16).

By C. N. Vaze
Shailesh Kamdar
Jagdish T. Punjabi
Bhadresh Doshi
Chartered Accountants
Reading Time 2 mins
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New Page 1

53 (2010) 124 ITD 480 (Chd.)

Dr. Rahul Tugnait v. ITO

A.Y. : 2005-06. Dated : 30-6-2008


S. 10(16) — Scholarship/stipend paid to assessee — Whether
can be termed as salary — Held, No. The same is exempt u/s.10(16).


Facts :

The assessee completed his MBBS degree and joined a medical
college as a junior resident for post graduation. He received a sum of
Rs.2,65,955 from the college as a scholarship/stipend for higher education. The
assessee claimed the said amount as exempt u/s.10(16) of the Act. The AO
disallowed the claim on the ground that the said amount forms salary income in
the hands of the assessee.


Held :


1. The terms and conditions mentioned in the bond signed
between the assessee and the college clearly use the words ‘scholarship’ and
‘scholarship holder’.

2. The assessee had made an application to the principal
of the medical college. The letter of the Principal clearly states that the
amount is a ‘stipend’ to the post-graduate student.

3. S. 10(16) of the Act speaks about the scholarship
granted to meet the cost of education, therefore, it can be said that even
if it is an income in the hands of recipient, it cannot be taxed, because it
is a scholarship to meet the cost of education.



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