Letter to Director on 27.01.09: STIPEND IS ALSO NOT TAXABLE

Respected Sir,

This to draw your kind attention to some of the important facts regarding Income tax on stipend that have been repeatedly misrepresented to you.

1. In the answer provided to Dr. Nikhil S Bhoomkar [PDCC Anesthesia 2008 batch, course completed on 31/12/08] as per RTIA/64/SCTIMST/2008 dated 16-12-2008 the institute has clearly stated that it provides "STIPEND" to the students and not "SALARY". As per the opinion of some leading Tax consultants of the country and the references attached herewith it has been clearly established that STIPEND IS NOT TAXABLE.

A) [1981] 128 ITR 527 (KAR.) HIGH COURT OF KARNATAKA Ratnakar Rao (A) v. Additional Commissioner of Income-tax
B) [1990] 184 ITR 533 (MAD.) HIGH COURT OF MADRAS Dr. V. Mahadev v. Commissioner of Income-tax
C) High Court of Bangalore, Bench of Income-Tax Appellate Tribunal in ITO versus Dr G. N. Ramachandran 1 ITD 902
D) [1983] 15 Taxman 100 ITAT Jaipur High Court Bench, Sudhir Kumar verma Vs ITO

2. As per the same reference (RTIA/64/SCTIMST/2008) it has been further stated that as the institute considers the payment to students as "STIPEND" , the recommendation of the 6th Pay Commission is not applicable to them, unlike other employees of this institute. Therefore, Sir, as there is no employer - employee relationship between the institute and the students the stipend provided to them is not taxable.

Sir, we strongly feel that you have been misdirected on this issue by the Academic and Financial section of our institute and we request for the following actions

1. Clarify the employer - employee status between the PG Students/Resident Doctors and the Institute.

2. If we are the employee of this institute and eligible for TDS ( Tax deduction at source - the current prevailing system), kindly make arrangement for payment of arrears and other benefits like medical reimbursement, HRA, book grants etc.
If we are not the employee of this institute then kindly stop deduction of TDS with immediate effect and make necessary arrangements for refunding the amount deducted so far.

3. Kindly let us know if any disciplinary action will be taken against the signing authorities of those misleading orders who have caused unnecessary trouble for this Institute of National Importance.
Sincerely yours'
Resident Doctors of SCTIMST