Stipend received by the trainee is fully exempt.

Stipend received by Trainee is exempt from tax as held in A. Ratnakar Roa V. Add. CIT 128 ITR 527 and Sudhirkumar Sharma V. ITO 17 TTJ 226

1. A. Ratnakar Rao vs Add CIT 128 ITR 527

The facts of the case was that he assessment year is 1971-72. The assessee filed the return of income for the period ending March 31, 1971. He declared his total income at Rs. 61,117. He, also indicated in the returns that he had received $ 7,725 from the Jewish Hospital, Brooklyn, U.S.A. during the period from July 1, 1970, to March 31, 1971, by way of scholarship. The A.O initially accepted , but later on audit objection, the amounts were considered as taxable.

The court's decision

"The Jewish Hospital and Medical Centre of Brooklyn has a large physician graduate training programme. A trainee stipend of $ 10,300 was paid to each physician during the academic year July 1, 1970, to June 30, 1971. The primary purpose of the programme is to further the education and training of the recipient in his individual capacity and the amount provided by the guarantor for such purpose does not represent compensation for services to patients nor does it serve the interest of the guarantor. In other words, services are of only incidental benefit to the hospital. The trainee stipend is defined as an amount Paid or allowed, or for the benefit of, an individual trainee to aid him in the pursuit of study and research in pediatrics."

From the above certificate it is evident that the amount paid to the assessee by the hospital was for the benefit of securing training and to pursue study and research in pediatrics. Therefore, there cannot be any doubt that the entire amount paid by the hospital and received by the assessee was in the nature of scholarship to pursue study and research in pediatrics and also for the purpose of securing training in that field and it was not for the services rendered as such and the services, if any, rendered by the assessee was only incidental to the course of practical training. . Attention of the Tribunal was invited to the position in law in the United States according to which the scholarship amount received was exempted in full if the study or course of education in respect of which it was granted was leading to a degree and in other cases the exemption would be limited to the extent of $ 300 per month. There was also evidence to the effect that the assessee had obtained deduction at the rate of $ 300 per month on the ground that though the amount received by him from the Jewish hospital was in the nature of scholarship it was not for pursuing a course of education leading to a degree.

Regards,

Shefali.