New Delhi, Sept. 16 -- A postgraduate medical student received Rs.18.34 lakh as stipend from Aligarh Muslim University while pursuing an MS in General Surgery. The Income Tax Department treated the amount as taxable salary, but the Delhi Income Tax Appellate Tribunal (ITAT) has deleted the addition, holding that the stipend was connected with her postgraduate education and compulsory residency training.

The ruling is important for students receiving stipends during higher education because the fact that a payment is called a stipend does not by itself determine its tax treatment. What matters is whether it is a scholarship granted to meet the cost of education, as covered by Section 10(16) of the Income-tax Act, 1961.

The ruling came in...