direct taxes circular - sec. 10(16)

8/11/2019 Direct Taxes Circular - Sec. 10(16)

1/4

SECTION 10(16) l SCHOLARSHIPS

114. Scholarships to meet cost of education - Specific cases where they have been treated asexempt from tax under clause (16)

CLARIFICATION 1

ANNUAL ALLOWANCE GRANTED TO RETIRING RESEARCH SCIENTISTS- The Board have decided

that the annual allowance of Rs. 6,000 to the retiring research scientists granted by the Council of Scientificand Industrial Research, New Delhi should be treated as exempt from tax in the hands of the recipients under

section 10(16) as scholarships granted to meet the cost of education.

Letter : F. No. 24/2/69-IT(A-I), dated 14-1-1968.

CLARIFICATION 2

STIPEND OF RESEARCH FELLOWSHIPS WORKING UNDER THE NATIONAL COMMISSION FOR

THE COMPILATION OF HISTORY OF SCIENCES OF INDIA -The Board have decided that the stipend of

research fellowships working under the National Commission for the Compilation of History of Sciences in

India under the auspices of the National Institute of Sciences of India should be treated as exempt from tax in

the hands of the recipients under section 10(16) as scholarships granted to meet the cost of education.

Letter : F. No. 24/25/68-IT(A-I), dated 18-9-1966.CLARIFICATION 3

FULBRIGHT GRANTS TO AMERICAN STUDENTS -Attention is invited to the Boards Letter No. 46(83-

IT/54), dated 6-8-1954 according to which Fulbright Grants, described as maintenance allowances, are

exempt from income-tax in respect of Fulbright Students.

The United States Educational Foundation in India has now represented that the grants given to American

tutors are also intended to cover the expenses for their maintenance while they are prosecuting certain

studies in India and, as such, these should be treated as exempt under section 10(16). The Ministry of

Education are satisfied that the maintenance allowance of Rs. 1,000 per month paid to the American tutors is

for their maintenance and that the purpose of the allowance is to meet the cost of education. The Board have,

therefore, decided that the Fulbright grant described as maintenance allowance given to American tutorsmay be treated as exempt from tax under section 10(16).


CLARIFICATION 4

JUNIOR/SENIOR RESEARCH FELLOWSHIPS AWARDED BY THE DEPARTMENT OF ATOMIC

ENERGY - A reference is invited to the Boards Circular No. 6(XXIII-27) of 1962, dated 24-3-1962,

according to which the Junior and Senior Research Fellowships, instituted by the Department of Atomic

Energy, of the value ofRs. 250 p.m. and Rs. 400 p.m. respectively, for study and research in the field of

Nuclear Physics and Cosmic Rays are to be treated as exempt from tax in the hands of the recipients under

section 10(16) as being scholarships granted to meet the cost of education.

The Department of Atomic Energy has now stated that the scope of these Fellowships has been extended tocover various other fields of research in Agriculture, Bio-chemistry, Bio-physics, Botany, Zoology, Organic

Chemistry, Electronics and Microbiology. The values of the Fellowships have also been increased as below :

Junior research fellowships ... Rs. 300 p.m.

Senior research fellowships (A) ... Rs. 400 p.m.

Senior research fellowships (B) ... Rs. 500 p.m.

The Board have decided that the abovementioned allowances in the various fields should be treated as

exempt from tax in the hands of the recipients under section 10(16) as being scholarships granted to meet the

cost of education.

CT TAXES CIRCULAR - Sec. 10(16) file://///WINMAN/OFFICE FILES new/DIRECT TAXES CIRCUL

7/19/2014


2/4


CLARIFICATION 5

FINANCIAL ASSISTANCE TO RESEARCH WORKERS IN UNIVERSITIES FOR UNDERTAKING

RESEARCH ORLEARNED WORK - Under the scheme for grant of financial assistance to teachers in the

universities for undertaking research or learned work in science subjects and humanities (including social

sciences) as non-recurring grant (subject to a maximum of Rs. 5,000) is payable to the teachers for purchase

of special apparatus, special chemicals, stores books, consumables, etc., and for field-work in connection

with the research. The above grant will be exempt from tax under section 10(16).Letter : F. No. 24/7/64-IT(A-I), dated 24-3-1964.

CLARIFICATION 6

MAINTENANCE ALLOWANCE GRANTED TO FOREIGN TRAINEES - IAESTE SCHEME -

REFERENCE FROM THE MINISTRY OF EDUCATION (DEPTT. OF SCIENCE) - India is a member of the

International Association for the Exchange of Students for Technical Experience (IAESTE). Under this

scheme, Indian students are sent abroad for training in other member countries and in return foreign students

come to India for training in industries/organisations/technical institutions, participating with this scheme in

India.

The foreign trainees coming to India are paid a maintenance allowance of Rs. 400 per month. It has been

decided that the maintenance allowance paid to foreign trainees, coming under the exchange scheme ofIAESTE should be treated as scholarships granted to meet the cost of education and exempted from

payment of income-tax under section 10(16).

Letter : F.No. 24/4/64-IT(A-I), dated 12-2-1964.

CLARIFICATION 7

RESEARCH FELLOWSHIPS IN ENGINEERING, TECHNOLOGY, HUMANITIES AND SCIENCE

SUBJECTS - The research fellowships in engineering technology, humanities and science subjects given by

University Grants Commission will be exempt under section 10(16). The contingent grant of Rs. 1,000 per

year to meet petty expenses will also be exempt under section 10(14) of the Income-tax Act, 1961.


CLARIFICATION 8

JUNIOR AND SENIOR RESEARCH FELLOWSHIPS AWARDED BY THE COUNCIL OF SCIENTIFIC

AND INDUSTRIAL RESEARCH - The Council of Scientific and Industrial Research, New Delhi, awards

junior and senior research fellowships to young research workers of Indian citizenship for enabling them to

carry on research in various branches of science in the Council of Scientific and Industrial Research

establishments, Research Associations Laboratories and other institutions approved by the Council. The

allowance attached to a junior research fellowship is Rs. 200 p.m. (Rs. 300 in the case of certain engineering

subjects) and in the case of senior research fellowship, it is Rs. 400 (Rs. 500 in certain engineering subjects).

The tenure of each fellowship is normally for a period of two years.

The Board have decided that the abovementioned allowances should be treated as exempt from tax in the

hands of the recipients under terms of item 5 of the late Finance Departments Notification No. 878-F-IT,dated 21-3-1922 (as amended from time to time) under section 60(1) of the Indian Income-tax Act, 1922 as

being scholarships granted to meet the cost of education.

Circular :No. 3(XX-III-23), dated 12-1-1961.

CLARIFICATION 9

NATIONAL RESEARCH FELLOWSHIP AND FELLOWSHIPS TO GERMAN NATIONALS AWARDED

BY THE MINISTRY OF EDUCATION - The Ministry of Education, Government of India, have recently

instituted the following fellowships :

National research fellowships in science and technology are awarded on the all-India basis for post-doctoral


7/19/2014


3/4

work in any branch of science or technology in universities and other institutions of university standard in

India. Each fellowship is of the value of Rs. 400 p.m. and grant of Rs. 1,000 per year is also given for any

special apparatus or equipments required for research. Each fellowship is tenable for a period of 3 years. In

special cases, it may be extended up to 5 years with the sanction of the Government.

Fellowships to German nationals studying in India under German Industrial Co-operative Scheme - Since

1952, the Government of India have been awarding 10 fellowships to German nationals every alternative year

under the Indo-German Industrial Co-operative Scheme for the study of Indian languages, religion and

philosophy, etc., at Indian universities. The normal period of award is 2 years. The benefits given under each

fellowship are as follows :

a. maintenance allowance at the rate of Rs. 500 per mensem;

b. second class railway fare from the place of residence in Germany to the port of embarkation and back;

c. second/tourist class sea passage from the port of embarkation to the port of disembarkation in India and

back; and

d. first class railway fare from the port of disembarkation in India to the place of study in India and back.

The Board have decided that these fellowships should be treated as scholarships granted to meet the cost of

education and exempted from tax under item (5) of the late Finance Department Notification No. 878-F

(Income-tax), dated 21-3-1922.

Circular :No. 49(XXIII-12), dated 13-12-1956.CLARIFICATION 10

EXEMPTION FROM TAX OF LIVING ALLOWANCE/STIPEND PAID TO FOREIGN TRAINEES

COMING TO INDIA UNDER THE TECHNICAL CO-OPERATION SCHEME OF THE COLOMBO PLAN

AND THE SPECIAL COMMONWEALTH AFRICAN ASSISTANCE PLAN - Certain foreign nationals

come to India for receiving training in various courses of study under the Technical Co-operation Scheme of

the Colombo Plan and the Special Commonwealth African Assistance Plan (SCAAP). During the period of

their training in India, these trainees are paid a living allowance varying from Rs. 200 to Rs. 600 p.m. It has

been decided that the above living allowance payable to the trainees would be exempt from tax under section

10(14)/10(16).

Source :Income-tax Circulars, published by the Directorate of Inspection (Research, Statistics andPublication), 1968 edition, p. 89.

CLARIFICATION 11

FELLOWSHIPS AWARDED UNDER TECHNICAL TEACHERS TRAINING PROGRAMME - The

Ministry of Scientific Research and Cultural Affairs awards about 100 fellowships under the Technical

Teachers Training Programme to prepare graduates for the teaching profession. The fellowships are of the

value of Rs. 350-25-400 and do not carry any additional allowance. The duration of a fellowship ranges from

2 to 3 years. It has been represented that the value of the fellowship may be exempted from income-tax.

The Board have decided that out of the total value of the fellowship, an amount of Rs. 250 p.m.

(representing the cost of education) may be treated as exempt from income-tax. This amount will be fully

exempt and is not to be included in the total income of the individual concerned for any purpose.Circular :No.11(XXIII-24) [F. No. 27/67/60-IT(A-I)], dated 4-4-1961.

115. Annual allowance payable to retired scientists under a scheme instituted by Indian Councilof Agricultural Research - Not to be exempt under clause (16) as the same being paid for their

maintenance

1. The Indian Council of Agricultural Research has instituted a scheme for Utilisation of the services of

retired scientists in the field of agriculture, animal husbandry and allied sciences. The object of the scheme is

to provide suitable facilities to enable retired scientists of established repute to continue scientific research

after their retirement. The scientists have to devote their whole-time to the research project for which the

financial assistance is provided and they are precluded from accepting any other remunerative job. The


7/19/2014


4/4

scheme provides for payment of an annual allowance not exceeding Rs. 6,000 to the retired scientistplus a

grant not exceeding Rs. 4,000 p.a. to cover the cost of one research assistant plus other expenses as may be

decided by the Standing Committee of the Council.

2. On a reference received from the Indian Council of Agricultural Research in this behalf, it has been

decided by the Board that the annual allowance of Rs. 6,000 payable to the individual scientists is intended

for their maintenance and it is not a payment to meet the cost of education. As such, this amount will be

taxable in the hands of the recipients. The Indian Council of Agricultural Research have instructed the

scientists to pay the tax direct to the income-tax authorities. It is, accordingly, requested to bring the decision

to the notice of all the Assessing Officers for their information and necessary action.


JUDICIAL ANALYSIS

EXPLAINED IN -In CIT v. V.K. Balachandran [1984] 147 ITR 4 (Mad.), it was observed as under :

Before closing the judgment, it is necessary to point out that the interpretation we have placed on

section 10(16) is the way in which it has been understood and is being applied in several cases by the

highest revenue authority under the Act, namely, the CBDT. Our attention has been drawn to a few

circulars where the Board have issued instructions to the subordinate officers as to how they have got todeal with the scholarships, remuneration, maintenance grants, and other receipts which are received by

foreign scholars in Indian institutions of higher learning like the Council of Industrial and Scientific

Research. The Board, we may observe, has proceeded on a liberal understanding of the provisions of

section 10(16) and have accordingly given instructions to the departmental officials at the assessment

level to grant exemption from tax to scholarships apparently without making much fuss about the precise

nature of the receipts so long as the receipts of the scholars can be broadly brought under the heading

Scholarship and so long as the terms of the scholarship do not contain any purpose extraneous to

education. In the face of these circulars, we are at a loss to understand why the present reference is

being pressed to a decision by the Department in the Madras charge. There cannot be one rule for

foreign students receiving scholarships in India and the tax treatment of such scholarships under the Act,

and quite a different rule or a contrary application of the same rule, so far as the Indian scholars inforeign parts are concerned. The nature of the scholarship is the same whoever receives it, whether he be

an Indian scholar or a foreigner, whether he be white, brown, or black, whether he receives the

scholarship from an Indian institution or from a Western institution. The essence of scholarship is that it

should pay for the educational enterprises of a mans pursuit after knowledge. If scholarships are given

for such a purpose, it cannot matter whether the recipient is of Indian origin or is of a foreign origin. We

hope that there would be even handed justice from the CBDT and all the subordinate officials of the

Income-tax Department in the matter of applying the exemption for scholarships irrespective of to whom

and by whom these scholarships are meted out. (pp. 8-9)


7/19/2014

direct taxes circular - sec. 10(16)

Documents