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stipend

vaishali (articleship) (171 Points)

15 January 2010

can anyone know whether stipend recd by article suppose Rs. 450000/- p.a in case of male or female whether it is fully exempt or taxable please also give me the reason & any case law in respect of the same if available

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22 Replies

Amir (Learner) (4016 Points)
Replied 15 January 2010

Dear Vaishali,

the following link may help u......

/experts/experts_message_display.asp?group_id=110121

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ashish gupta ( student) (1922 Points)
Replied 15 January 2010

It is exempt as per section 10(16). i can mail u the relevant case law.

Amir (Learner) (4016 Points)
Replied 15 January 2010

Dear Ashish,

I have hecked Sec 10(16),

It says "Scholorship granted to meet the cost of education"

Don't think stipened gets covered in it, But it would be really nice if u can fwd that case to me as well.

Thanks

Pooja Rane (Working) (159 Points)
Replied 15 January 2010

I think ashish is partially rite... coz if i rembr correctly...d case he is talkin abt refered to a v small amount of stipend... which held good at its case... again its a very old case law...i think...

in d current scenario...wid 4.5lacs stipend it wud be taxable...

@ ashish state that case law which u talkin abt here pls....

Hareesh H Sharma (Cleared IPCC..now article) (894 Points)
Replied 15 January 2010

Dear Vaishali,

I have read another long disc abt this in this forum..will try to post it...and there someone said that in the form you ppl sign before entering into articles it says that the principal shall also be an employer and hence there is an employer employee reln exists..this was the opposite point raised to the case law pointed here..

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Hareesh H Sharma (Cleared IPCC..now article) (894 Points)
Replied 15 January 2010

Refer this case

Attached File : 56 articleship stipend.pdf downloaded: 348 times

Hareesh H Sharma (Cleared IPCC..now article) (894 Points)
Replied 15 January 2010

/forum/message_display.asp?group_id=52037 Refer this also

ashish gupta ( student) (1922 Points)
Replied 15 January 2010

pls find the case law

Attached File : 43 stipend income.pdf downloaded: 309 times

girish (Article assitant) (27 Points)
Replied 15 January 2010

Dear Vaishali

it is exempt U/s 10(16)

RADHIKA JALAN (agarwal) (1521 Points)
Replied 15 January 2010

exempt u/s 10(16).

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CA PRAVEEN KESHAV (CHARTERED ACCOUNTANT) (331 Points)
Replied 15 January 2010

exempt U/s 10(16)

Duke (Article Assistant) (39 Points)
Replied 15 January 2010

Dear vaishali i am sorry to say that there is a very little chance for your stipend to be exempt income. NE way u can always supress ur income . HAHAHA

Aditya Maheshwari (CA in Practice) (35867 Points)
Replied 15 January 2010

Section 10(16) states as under:

(16) scholarships granted to meet the cost of education;

So the stipend that we receive is no where to meet the cost of our education.

Also it has been held that

Scholarship, even though income, is exempt only if it is granted to meet cost of education - The proper view to take on section 10(16) of the Act would be that scholarship, even though income in the hands of the scholar-recipient, would not be included in the taxable total income, if it was a scholarship granted to meet the cost of education - Dr. V. Mahadev v. CIT [1990] 51 Taxman 411/184 ITR 533 (Mad.).

Aditya Maheshwari (CA in Practice) (35867 Points)
Replied 15 January 2010

Taxability of Stipend

Whether stipend received by trainee during training period is taxable or not, a big question.

And if at all Taxable under which head of income?

Opinion in favour of queriest

Stipend, prima facie, should be treated as a scholarship and should be exempt, since Sec. 10(16) exempts all ``scholarships granted to meet the cost of education''. In CIT v V. K. Balachandran (1984) 147 ITR 4 (Mad), the amount received as grant-in-aid and other fringe benefits from a foreign university, though in the nature of salary, was found to be still exempt under Sec. 10(16). A similar medical scholarship from a foreign university during training programmes was held to be exempt under Sec. 10(16) in A. Ratnakar Rao v Addl. CIT (1981) 128 ITR 527 (Kar) and Dr. V. Mahadev v CIT (1990) 184 ITR 533 (Mad).

In the latter case, it was held that since scholarship is exempt, even if there be any savings therefrom, it need not be taxable.

Opinion against queriest

Stipend is not expressly exempt under the Act. Thus Stipend is certainly taxable income if it is purely being given in form of cost of living or as wages or salary or for any purpose but if it is purely for meeting cost of studies then it’s otherwise. However, if the Stipend granted is for furthering education or gaining knowledge, same can be claimed exempt u/s 10[16] of the I T act. In this regard the decision of the Karnataka High Court in A. Ratnakar v. Addl. CIT [1981] 128 ITR 527 can be applied. This was also followed by Tribunal in case of Income-tax Officer v. Dr. G. N. Ramachandran [1 ITD 902]. Since there is no Employee Employer relationship the said income would not fall under head “Income from Salaries” and will be taxable under the head “Income from Other Sources”.