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TMI Blog1982 (11) TMI 5X X X X Extracts X X X X X X X X Extracts X X X X ..... India. He claimed that the grant-in-aid received by him from the Princeton Institute was to be excluded from his taxable income under s. 10(16) of the I.T. Act. The ITO turned down the assessee's claim on the score that the grant-in-aid was nothing but salary paid by a foreign institute to the assessee as a professor of mathematics. On appeal, the AAC went into the question whether the grant made by the Princeton Institute can be regarded as salary. He held that there was no employer-employee relationship between the institute and the assessee and the grant was not salary, but a scholarship paid to the assessee for doing research work as student of mathematics. In the departmental appeal against this order, the Tribunal held that the grant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thinking that thereby it would get taxed. The AAC laboured hard to hold that it was not income, again under wrong impression that if it were otherwise, it would not fall within the purview of s. 10(16). The true view of s. 10(16), as the. Tribunal has correctly understood it, is that scholarship, even though income in the hands of the scholar concerned, would yet be excluded from the ambit of taxable total income. Mr. Jayaraman, learned counsel for the Revenue, submitted that the Tribunal had enlarged the scope of the exclusion provision in s. 10(16) when they held that the expression " to meet the cost of education " must be construed liberally. We do not think so. In our view, the words " to meet the cost of education " are not a limit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s paid is intended to meet the cost of education of the recipient. Since the purpose is to meet the cost of education, the question whether the quantum of payment is adequate or inadequate, or is or is not in excess of requirements are all beside the point. A scholarship may only meet the partial cost of education. Still it would be a scholarship within the meaning of s. 10(16). Again, a scholarship might, in a given case, prove to be more than enough for meeting the cost of education, and the scholar may make a saving out of it, or even spend the surplus otherwise. It is not the appropriation of the scholarship that matters. If the whole object of the payment is to meet the cost of education of a person, then that is enough. No further inq ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... education, the fact that the recipient does not spend the whole amount towards education or that he is able to save something out of it would not detract from the character of the payment being one for scholarship. The assessee in this case was named as an " exchange visitor " to engage himself as a member in the school of mathematics for doing advance research in the field of mathematics. To defray his expenses of study, the amount of $ 10,000 for study, $ 2,000 for travel and a further grant of $ 13,800 for sundries were given to the assessee. There can, therefore, be no doubt that the grant-in-aid was a scholarship to meet the cost of the assessee's education. Mr. Jayaraman did not argue that advance research cannot be brought within ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he face of these circulars, we are at a loss to understand why the present reference is being pressed to 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 I.T. Act, and quite a different rule or a contrary application of the same rule, so far as the Indian scholars in foreign parts are concerned. The nature of the scholarship is the same whoever receives it, whether he be an Indian scholar or 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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