1979 (3) TMI 107 - AT - Income Tax

Summary

Issues Involved:
1. Taxability of stipend received under the National Science Foundation (NSF) Fellowship.
2. Addition of Rs. 2,000 as the assessee's share in the income from the residuary property of the assessee's father.

Issue-wise Detailed Analysis:

1. Taxability of Stipend Received under the National Science Foundation (NSF) Fellowship:

The primary issue in these appeals is whether the sums of Rs. 28,125 received by the assessee each year as a stipend under the National Science Foundation (NSF), Washington, for carrying on research, were taxable under the provisions of the IT Act, 1961, for the assessment years 1971-72 and 1972-73.

The assessee claimed that these receipts were exempt under Section 10(16) of the IT Act, 1961, asserting that they were meant to cover the cost of expenditure related to stay, study, and research work in America. The lower authorities had rejected this claim, treating the stipend as part of remuneration for services rendered to George Washington University, USA, and thus taxable.

The assessee provided substantial documentation to support his claim, including a telegram from the Director of NSF, letters confirming the fellowship, and a detailed note on the research work conducted, seminars attended, and papers published. The fellowship was explicitly stated to be for scientific activities and contributions to science training and research at U.S. institutions.

The tribunal analyzed the nature of the payments and the purpose of the fellowship. It was noted that the fellowship awards were for making significant contributions to science training and research, and the fellows were given latitude in their activities, which could include teaching and lecturing. However, these activities were part of the overall contribution to science and not the primary purpose of the stipend.

The tribunal rejected the argument that the stipend should be treated as remuneration for services rendered, emphasizing that the term "scholarship" as defined includes emoluments for students and that the nature of the payments should be determined by the context and purpose of the award, not merely by the nomenclature used.

The tribunal concluded that the payments made under the NSF fellowship could only be considered as "scholarships" and thus were exempt under Section 10(16) of the IT Act, 1961. Therefore, the assessee was entitled to the exemption for both assessment years under appeal.

2. Addition of Rs. 2,000 as the Assessee's Share in the Income from the Residuary Property of the Assessee's Father:

For the assessment year 1971-72, the assessee also contested the addition of Rs. 2,000, which was estimated by the ITO as the assessee's share of income from his late father's estate. The assessee argued that there was no income from the residuary property and that the estimate was excessive.

The tribunal noted that the assessee had not furnished any details to support his claim before the lower authorities. However, the assessee's counsel provided new information indicating that the actual income from the father's estate for the financial year 1970-71 was only Rs. 343 from a fixed deposit, which belonged to the HUF and was not taxable in the assessee's hands.

The tribunal directed the ITO to examine this claim and modify the assessment in accordance with the law and on merits.

Conclusion:

The appeal for the assessment year 1972-73 was allowed, and the appeal for the assessment year 1971-72 was allowed in part, subject to the reassessment of the Rs. 2,000 addition. The tribunal's decision provided a thorough analysis of the nature of the NSF fellowship stipend and upheld the exemption under Section 10(16) of the IT Act, 1961, for the amounts received by the assessee.