Evolving A Broader View

In common terms a scholarship (in terms of money) implies some kind of help, gift, assistance or other aid to help a student/person pursue his studies/intellectual attainments. Thus scholarships granted to meet the cost of education get covered by this exemption. In A Ratnakar vs Addl CIT (1981) 128 ITR 527 (Kar), the assessee received a sum of $7,725 from a hospital in the US. It was found that the amount was for the benefit of securing training and to pursue research in pediatrics. It was therefore, held to be exempt.

The CBDT has taken a broader view in this regard. Since 1952, the government of India has been awarding 10 fellowships to German nationals every alternative year under the Indo-German Industrial Cooperation Scheme, for the study of Indian languages, religion and philosophy etc, at Indian universities. The normal period of award is two years. The benefits given under each fellowship as considered by the CBDT are:

 

Maintenance allowance at the rate of Rs 500 per month;

Second class railway fare from the place of residence in Germany to the ort of embarkation and back;

Second/tourist class sea passage from the port of embarkation to the port of study in India and back;

First class railway fare from the port of disembarkation in India to the place of study in India and back;

It was decided, (vide circular No 49 (XX111-12) dated December 13, 1956), that such receipts were exempt under the notification issue under the 1922 IT Act.

An interesting issue came up for the consideration of a bench of the IT Appellate Tribunal, in the case Dr JCN Joshipur vs CIT (1996) 56 ITR 424 (Bom). The assessee was an eminent orthopedic surgeon attached to a hospital. During the relevant assessment year, he received a grant of Rs 15,000 from the hospital an amount paid by the hospital to deserving doctors attached to it once every three years, for attending a conference or for a study tour for advancement of their knowledge. The assessee's claim for exemption under Section 10(16) was rejected by the assessing officer, who taxed the grant as the professional income of the assessee.

On second appeal, the assessee contended that the travel grant was given as an opportunity to get practically acquainted with the rapid scientific developments, particularly in the field of orthopedics. Thus, the grant was for meeting the cost of education. However, the revenue contended that it was a travel grant and not a scholarship.

The Tribunal has said that each law consists of two parts, viz body and soul; the letter of the law is the body of the law and the sense and reason of the law is its soul. The words in a section are not to be interpreted with the words in one hand and the dictionary in the other. In spelling out the meaning of a word in a section, it is a sine qua non to see the purpose for which the provision is enacted. Section 10 (16) is enacted to further the cause of education. The requirements of this section is that the scholarship must be granted to meet the cost of education. The cost of education takes within its ambit not only the tuition fee, which the student is required to pay to the concerned institution, but all other incidental expenses incurred for acquiring education. The word `education' includes within its ambit, knowledge, understanding and reflection.

One cannot get education just by paying the tuition fees. One acquires knowledge by going to school. But knowledge gathered at school is not complete education. The scope of education is vast. If one is required to travel to a place for the sake of education, the expenditure on travelling will also come within the ambit of the expression `cost of education'. Therefore, a travel grant given for the purpose of education shall form an integral part of the cost of education.

There are two considerations which, taken together, make up the concept of a scholarship for meeting the cost of education within the meaning of Section 10(16). One is that the scholarship is a payment intended to be an income receipt in the hands of the scholar. The other is that whatever is 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 not or is in excess of requirements, is beside the point. The scholarship may only meet the partial cost of education, still it would be a scholarship within the meaning of Section 10(16).

In the above case, the travel grant was given to provide an opportunity to get first-hand experience. Considering the profession of the assessee, his specialised knowledge in the field of orthopedics and his educational qualifications, he could very well be categorised as a scholar. Therefore, the amount of Rs 15,000 given to him came clearly within Section 10(16).

In an age, where the need for updating knowledge and technology is fast becoming imperative for survival, a broad interpretation of tax provisions like Section 10(16) is necessary. It is heartening to find that both the CBDT and the appellate authorities are discarding narrow interpretations to fulfill the objectives sought to be achieved by such measures.

If one is required to travel to a place for the sake of education, the expenditure on travelling will also come within the ambit of the expression cost of education'