1983 (4) TMI 109 - AT - Income Tax

Summary

Issues:
1. Whether the stipend received by the assessee constitutes income liable to tax.

Analysis:
The appeal before the Appellate Tribunal ITAT Jaipur involved the question of whether the stipend of Rs. 2000 received by the assessee during the assessment year 1981-82 from the Chartered Accountants firm where he was undergoing training as an articled clerk was taxable as income. The assessee claimed that the stipend was exempt under section 10(16) of the Income Tax Act, 1961. The authorities below had rejected the claim, asserting that the stipend was paid as compensation for services rendered by the assessee. The representative for the assessee argued that the stipend was intended to cover expenses such as books, coaching fees, and examination fees, rather than as payment for services. The departmental representative contended that the payment of stipend implied compensation for services. However, the Tribunal disagreed with the revenue's contention, emphasizing that an articled clerk's primary purpose is to learn and receive training, not to provide services to the Chartered Accountant. The Tribunal held that the stipend was not payment for services rendered, but rather to cover training-related expenses, based on the background presented by the assessee's representative. Therefore, the Tribunal concluded that the stipend was not taxable income for the assessee.

The Tribunal's decision hinged on the understanding that the payment of stipend to an articled clerk was not in exchange for services rendered, but rather to facilitate the articled clerk's training by covering necessary expenses. The Tribunal highlighted that the term "stipend" alone did not determine the nature of the payment, and it was essential to consider the actual purpose behind the payment. In this case, the Tribunal accepted the argument that the stipend was provided to enable the articled clerk to meet expenses incurred during the training period, such as books, coaching fees, and examination fees. The Tribunal's decision underscored the importance of the actual circumstances and purpose of the payment over the terminology used, ultimately leading to the conclusion that the stipend was not taxable income for the assessee.

In conclusion, the Appellate Tribunal ITAT Jaipur allowed the appeal filed by the assessee, ruling that the stipend received during the assessment year 1981-82 was not taxable income. The Tribunal's decision was based on the understanding that the stipend was not payment for services rendered by the assessee as an articled clerk, but rather a means to cover training-related expenses. The Tribunal's analysis focused on the purpose and nature of the payment, emphasizing that the term "stipend" did not automatically imply compensation for services.