Taxability of Stipend

Page no : 2

Anuraag Sharma (Sr Executive Finance) (845 Points)
Replied 26 May 2009

exempt u/s16....scholarship granted to meet the cost of acquiistion....

please refer the case of Sudhir Sharma V/s ITO......

am attaching the same file here...plaese go through it......

Attached File : 45 49 ca articleship stipend-10(16) exemption-case law.pdf downloaded: 130 times

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saurabh (CA) (552 Points)
Replied 01 June 2009

stipend recieved by an article clerk is a revenue receipt, and it would be chargeable to tax u/h Income from other sources as no empl'r-empl'ee relation is there in b/w a principal CA and an article .

however, It is the scholarship amt u/s 10(16) which is not chargable to tax as it is given to meet the cost of education

CA Jimmit D Mehta (Employed) (494 Points)
Replied 01 June 2009

I think it is taxable

Ajay Chaudhary (CA) (63 Points)
Replied 02 June 2009

Stipend is not generated out of any profitable activity, it is not considered as an income, therefore not taxable

MANISH KAPOOR (PARTNER) (97 Points)
Replied 02 June 2009

It is Taxable

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Anuraag Sharma (Sr Executive Finance) (845 Points)
Replied 04 June 2009

FULLY EXEMPT under section 10(16) of the Income Tax Act, 1961

Satish (CA Final Student) (479 Points)
Replied 05 June 2009

Since there is no employer-employee relationship exists, it cannot be taxed. To tax stiepend as a wage or salary it is necessary that there should be an employer-employee relationtionship between a student & a principal. Hence, there is no question of section 10 (16) here.

Radheyshyam Falod (CA) (416 Points)
Replied 05 June 2009

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”.

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