Hiteshi Aggarwal Vs PCIT (ITAT Chandigarh)
Stipend Received by Doctor During Post-Graduation Is Exempt Scholarship Under Section 10(16); PCIT Cannot Revise a View Taken After Detailed Enquiry: ITAT Chandigarh
The Chandigarh Bench of the Income Tax Appellate Tribunal has held that a stipend received by a medical doctor while pursuing a post-graduate course, pursuant to a Government scholarship scheme, is exempt under section 10(16) of the Income-tax Act, 1961. Such stipend cannot be equated with salary merely because tax was deducted at source by the medical college.
The Tribunal further held that where the Assessing Officer had examined the claim in detail, obtained confirmation directly from the medical college under section 133(6) and thereafter accepted the exemption, the PCIT could not invoke the revisional jurisdiction under section 263 merely because he held a different view.
The decision was rendered in the case of Hiteshi Aggarwal v. PCIT, Panchkula, concerning Assessment Year 2016-17.
Facts of the Case
The assessee was a medical doctor who was pursuing a post-graduate degree in Anaesthesia at Guru Gobind Singh Medical College, Faridkot, during the relevant financial year.
While undergoing the post-graduate course, she received stipend aggregating to ₹8,61,202. The medical college deducted tax of approximately ₹1,01,000 from the stipend.
In her original return of income, the assessee inadvertently disclosed the stipend under the head “Salary.” She subsequently filed a revised return declaring income of ₹15,816 after claiming exemption under section 10(16) in respect of the stipend. She also claimed refund of the tax deducted by the college.
The case was selected for scrutiny, during which the Assessing Officer specifically examined the assessee’s claim that the stipend constituted an exempt scholarship.
Detailed Enquiry by the Assessing Officer
The Assessing Officer issued a notice under section 142(1) dated 12.10.2018, calling upon the assessee to substantiate her claim under section 10(16).
The assessee furnished a detailed explanation along with supporting documents. The Assessing Officer did not stop with the explanation furnished by the assessee. He issued a notice under section 133(6) directly to the Principal of Guru Gobind Singh Medical College, Faridkot, seeking clarification regarding the nature of the payment made to the assessee during FY 2015-16.
In response, the college confirmed that the payments made to the assessee were in the nature of a stipend.
The assessee also furnished the statement of stipend received and a copy of the scholarship bond executed by her. The bond demonstrated that the assessee had been selected for a Government scholarship and that the payments were made in accordance with a Punjab Government notification dated 23.12.2013.
After examining the assessee’s submissions, the college’s independent confirmation and the scholarship documents, the Assessing Officer accepted the revised return and allowed the exemption under section 10(16).
Revision Under Section 263
The PCIT subsequently invoked the revisional jurisdiction under section 263. According to the PCIT, the assessment order accepting the exemption was erroneous and prejudicial to the interests of the Revenue.
The Revenue emphasised that the assessee had originally offered the stipend as salary and had changed her position only through the revised return by claiming exemption under section 10(16).
The assessee challenged the revisional order before the Tribunal. It was argued that the Assessing Officer had conducted a detailed enquiry and taken a legally permissible view after independently verifying the nature of the payment from the medical college.
Reliance was placed upon Dr. Rahul Tugnait v. ITO, CIT v. Rippen Ahuja and Kusum Lata v. CIT in support of the proposition that a stipend or scholarship received during post-graduate medical education is eligible for exemption under section 10(16).
Findings of the Tribunal
The Tribunal found that the Assessing Officer had raised a specific query regarding the exemption claimed under section 10(16). The assessee had furnished a detailed reply, and the Assessing Officer had also exercised his independent power of verification under section 133(6).
The medical college had categorically confirmed that the payment was a stipend. The scholarship bond and Government notification further established that the payment arose from a Government scholarship scheme connected with the assessee’s post-graduate medical education.
The fact that the college had deducted tax at source did not alter the true character of the receipt. Similarly, the fact that the assessee had originally disclosed the amount as salary did not prevent her from correcting the mistake through a valid revised return.
The Tribunal reiterated that for invoking section 263, both statutory conditions must coexist: the assessment order must be erroneous, and it must also be prejudicial to the interests of the Revenue. If either condition is absent, section 263 cannot be invoked.
Since the Assessing Officer had conducted a detailed enquiry and taken a sustainable view, the assessment order could not be regarded as erroneous. The case was not one of a lack of enquiry.
The Tribunal also followed its earlier decision in Dr. Rahul Tugnait v. ITO, where a stipend received by a doctor during a post-graduate course, pursuant to a similar scholarship bond, was held exempt under section 10(16).
Accordingly, the order passed by the PCIT under section 263 was quashed, and the assessee’s appeal was allowed.
Author’s Comments
Section 10(16) exempts a scholarship granted to meet the cost of education. The decisive consideration is the purpose and character of the payment, and not merely the description used by the payer or the treatment given in the TDS return.
A medical post-graduate may perform clinical or hospital duties as an integral part of the academic programme. Such duties do not automatically create an employer-employee relationship or convert the educational stipend into salary. The governing rules, admission terms, scholarship bond, Government notification and purpose of the payment must be examined collectively.
Deduction of TDS is also not conclusive regarding taxability. A payer may deduct tax out of caution, but the recipient remains entitled to establish that the underlying receipt is exempt and claim the corresponding refund.
The ruling is equally important on section 263. An order cannot be revised merely because it is brief or because the PCIT prefers another interpretation. Where the assessment records demonstrate a specific query, reply, third-party verification and conscious decision by the Assessing Officer, the case cannot be characterised as one involving a lack of enquiry.
Cases Discussed
- Dr. Rahul Tugnait v. ITO, ITA No. 197/Chd/2008, decided on 30.06.2008
- CIT v. Rippen Ahuja, 54 I.T. Reps 285 (P&H)
- Kusum Lata(Smt.), Panchkula v. CIT, Panchkula [2014] I.T. Reps 243 (ITAT Chd)
FULL TEXT OF THE JUDGMENT/ORDER OF ITAT CHANDIGARH
This appeal by the Assessee is directed against the order of the Principal Commissioner of Income Tax, Panchkula (hereinafter referred to as the ‘the PCIT’) passed under section 263 of the Act (hereinafter referred to as ‘Act’) for the A.Y. 2011-12 dt. 17/03/2021.
2. The appeal by the assessee is time barred by 15 days. The assessee/appellant has filed an application seeking condonation of delay supported by an affidavit. After examining contents of the affidavit we are of considered view that the delay in filing of appeal was not intentional or deliberate. The delay was caused due to bonafide reasons stated in the affidavit. Hence, the delay in filing of appeal is condoned and the appeal is admitted to re heard on merits.
3. Shri Rakesh Cajla appearing on behalf of the assessee submitted that the assessee is a medical doctor by profession. During the period relevant to A.Y. 2016-17 the assessee was pursuing her Post Graduation degree in Guru Gobind Singh Medical College, Faridkot. During the Post Graduation Course she received stipend in the nature of scholarship aggregating to Rs. 8,61,202/- . TDS of Rs. 101,000/- was deducted by the college on the aforesaid stipend. The assessee in her return of income for the A.Y. 2016-17 inadvertently declared stipend / scholarship as salary. Thereafter, she revised her return of income declaring income of Rs. 15,816/- after claiming exemption under section 10(16) of the Act in respect of stipend and claimed refund of the TDS deducted by the college.
4. In scrutiny assessment proceedings, the Assessing Officer (the A.O.) made detailed inquiry. A specific query was raised by the A.O. regarding exemption claimed under section 10(16) of the Act vide notice issued under section 142(1) dt. 12/10/2018. The assessee furnished detailed reply with supporting documents, the same is at page no. 15 & 16 of the paper book. The A.O. thereafter issued notice dt. 25/10/2018 under section 133(6) to the Principal Guru Gobind Singh Medical College, Faridkot to clarify regarding nature of payment made to the assessee during F.Y 2015-16. In reply to the notice it was informed on behalf of the college that the payment made to the assessee during the F.Y. 2015-16 was in the nature of stipend. The ld. Counsel referred to the reply from tax consultant of the college at page 17 and statement of stipend paid to the assessee at page no. 5 of the paper book. The ld. Counsel further referred to the scholarship bond executed by the assessee at page 6 to 10 of the paper book. The ld. Counsel submitted that under the provision of Section 10(16) of the Act scholarship granted to meet the cost of education is exempt from tax. In support of his submissions he placed reliance on following decisions:
(i) Dr. Rahul Tugnait Vs. ITO in ITA No. 197/Chd/2008 decided on 30/06/2008
(ii) CIT Vs. Rippen Ahuja, 54 I.T. Reps 285 (P&H)
(iii) Kusum Lata(Smt.), Panchkula Vs. CIT, Panchkula [2014] I.T. Reps 243 (ITAT Chd)
5. The ld. Counsel pointed that the stipend / scholarship was paid to the assessee in accordance with the Punjab Government Notification dt. 23/12/2013. The A.O. after examining the issue in detail accepted the revised return filed by the assessee and passed the assessment order dt. 26/11/2018. The ld. Counsel submitted that the PCIT has erred in invoking revisional jurisdiction under section 263 of the Act as the A.O. after making detailed enquiry has passed the assessment order. The assessment order is fair and justified, hence, requires no interference in revisional jurisdiction.
6. Per contra Shri Vikram Batra, representing Department vehemently defended the order passed by the PCIT under section 263 of the Act. The ld. DR submitted that the assessee in her original return of income had offered the income under the head ‘Salary’ thereafter, she revised her return and changed her stand by claiming exemption under section 10(16) of the Act.
7. We have heard the submissions made by rival sides and have examined the orders of the authorities below. The PCIT has invoked revisional jurisdiction under section 263 of the Act to reject the assessment order dt. 26/11/2018 wherein the A.O. has accepted the revised return filed by the assessee claiming exemption under section 10(16) of the Act in respect of stipend / scholarship received during her Post Graduation Degree in anesthesia.
8. A perusal of the records reveal that during assessment proceedings a specific query was raised by the A.O. in respect of assessee’s claim of exemption under section 10(16) of the Act. The assessee in response to that notice furnished a detailed reply. The A.O. also issued notice under section 133(6) of the Act to Guru Gobind Singh Medical College, Faridkot where the assessee was pursuing her Post Graduation Degree. The college also confirmed that the payments made to the assessee during F.Y. 2015-16 were in the nature of stipend. The assessee has also furnished stipend statement for the F.Y. 2015-16 at page 5 of the paper book and Bond executed by the assessee for scholarship at page 6 to 10 of the paper book. A perusal of aforesaid bond shows that the assessee was selected for Government scholarship and the payments were made to the assesse in accordance with the Government Notification. The college had deducted TDS on the payment of stipend, the assessee claimed refund of TDS in her revised return. The A.O. after making detailed inquiry accepted the revised return. The A.O. allowed assessee’s claim after making detailed inquiries. We find no error in the assessment order.
9. For invoking revisional jurisdiction under section 263 of the Act, twin condition as envisaged under section 263 of the Act have to be satisfied i.e the assessment order should be erroneous and prejudicial to the interest of the Revenue. Even if one of the twin conditions is not satisfied, the provision of section 263 of the Act cannot be invoked.
10. In the light of the facts discussed above, we are of the view that there is no error in the assessment order. The PCIT has erred in invoking revisional jurisdiction under section 263 of the Act.
11. We find that the Coordinate Bench in the case of Dr. Rahul Tugnait Vs. ITO (supra) wherein the facts were somewhat similar held that the assessee is eligible to claim deduction u/s 10(16) of the Act on stipend received during post graduation course. In the said case the assessee / appellant had joined Rajinder Government Medical College, Patiala to pursue his Post Graduation Degree. He had received stipend in the form of scholarship during his Post Graduation course from the college. He had executed the Bond similar to the one executed by the assessee in the instant case. The Coordinate Bench after examining the fact held that the assessee was eligible for claiming exemption under section 10(16) of the Act in respect of scholarship / stipend received during his Post Graduation studies. The stipend / scholarship cannot be equated to salary. The issue raked up by the ld. PCIT in reivisional jurisdiction in the present case is identical to the one adjudicated by the Tribunal. It is neither the case of “lack of inquiry”, therefore the impugned order is liable to be quashed. We hold and direct accordingly.
12. In the result, appeal of the assessee is allowed.
(Order pronounced on 28.10.2021)
