Case Note & Summary
The dispute arose from the Rajiv Gandhi Scholarship for Academic Excellence Scheme, 2021, under which the State of Rajasthan invited applications for financial assistance to meritorious students securing admission in top 150 universities abroad. The scheme classified applicants into three income-based categories: E-1 for gross family income below ₹8 lakhs, E-2 for income between ₹8 lakhs and ₹25 lakhs, and E-3 for income above ₹25 lakhs, with preference given to E-1 and E-2. The appellant, a domicile of Rajasthan, applied under Category E-1 claiming her family's gross annual income was below ₹8 lakhs. She disclosed that apart from regular income, her father had received capital gains from the sale of ancestral property in assessment years 2021-22 and 2022-23. Clause 8(v) of the consolidated guidelines dated 16.06.2023 excluded non-recurring income such as retirement benefits, gifts, and capital gains from the computation of gross annual family income. Despite this, the respondents, by order dated 28.02.2025, included the capital gains because they had accrued in two consecutive years, assessed the family income at ₹38.58 lakhs, and placed the appellant in Category E-3, thereby rejecting her candidature. The appellant's earlier writ petition had been disposed of on 29.08.2023 with a direction to consider the ITRs in light of Clause 8(v), but the respondents disregarded that direction. The subsequent writ petition challenging the rejection was dismissed by the learned Single Judge on 17.11.2025, leading to the present appeal. The core legal issue was whether capital gains reflected in consecutive assessment years could be treated as recurring income and included in gross annual family income for scholarship categorization. The appellant argued that Clause 8(v) expressly excluded capital gains regardless of recurrence and that the respondents' action was contrary to the guidelines and the prior judicial direction. The respondents contended that the scheme was intended for economically weaker sections, the ITRs showed substantial capital gains in consecutive years, and the appellant's financial profile did not justify E-1 placement; they claimed she was correctly placed in E-3. The court analysed Clause 8(v) and found that it does not provide that income received in two or more consecutive years becomes recurring; the exclusion is based on the intrinsic nature of the income. Capital gains arise from transfer of a capital asset and are not akin to regular income like salary or business profits. The court noted that the newly enacted Income Tax Act, 2025, classifies capital gains as a distinct head under Section 67 with separate charging provisions, computation mechanisms, and exemptions, underscoring their unique character. The court also observed that the properties sold were ancestral and not acquired for commercial purposes, a fact not disputed by the respondents. Consequently, the court found no logical or legal basis for treating capital gains as recurring merely because they accrued in two consecutive assessment years. The provided judgment text ends at paragraph 6.4 before the final operative directions; therefore, the final order is not included, but the court's reasoning clearly favored the appellant's interpretation that capital gains must be excluded from gross annual family income.
Headnote
A) Education Law - Scholarship Eligibility and Income Categorization - Non-recurring Income Exclusion - Rajiv Gandhi Scholarship for Academic Excellence Scheme, 2021 (Consolidated Guidelines dated 16.06.2023, Clause 8(v)) - The court examined whether capital gains disclosed in ITRs for consecutive assessment years could be included in gross annual family income for scholarship categorization. It held that Clause 8(v) expressly excludes income of an exceptional or non-recurring nature such as retirement benefits, gifts, and capital gains, and the exclusion is founded on the intrinsic nature of the income itself, not on its recurrence. Held that capital gains cannot be included merely because they accrued in consecutive assessment years (Paras 6-6.1). B) Income Tax Law - Capital Gains as Distinct Head of Income - Section 67 Income Tax Act, 2025 - The court noted that capital gains arise from the transfer of a capital asset and do not partake the character of regular or recurring income such as salary, business profits, or income from other sources. Under the newly enacted Income Tax Act, 2025, capital gains are recognized as a distinct and independent head of income under Section 67 with separate charging provisions, computation mechanisms, and exemptions. Held that mere reflection in consecutive assessment years does not justify their inclusion in the computation of gross annual family income in the absence of any such stipulation in the Scheme or the consolidated guidelines (Paras 6.2-6.4).
Issue of Consideration
Whether capital gains reflected in consecutive assessment years can be included in the computation of gross annual family income for the purpose of categorization and determination of eligibility under the Rajiv Gandhi Scholarship for Academic Excellence Scheme, 2021, despite the exclusion of non-recurring income under Clause 8(v) of the consolidated guidelines dated 16.06.2023.
Final Decision
The provided judgment text ends at paragraph 6.4 before the final operative directions; therefore, the final decision is not explicitly stated. However, the court's analysis found no legal basis for treating capital gains as recurring income under Clause 8(v) and suggested that the matter should be decided in favour of the appellant.
Law Points
- Clause 8(v) of Rajiv Gandhi Scholarship for Academic Excellence Scheme
- 2021 excludes non-recurring income such as capital gains from gross annual family income
- exclusion based on intrinsic nature of income
- mere receipt in consecutive assessment years does not convert capital gains into recurring income
- capital gains are a distinct head under Section 67 of Income Tax Act
- 2025
- capital gains arise from transfer of capital asset and do not partake character of regular recurring income
- respondents' inclusion of capital gains in consecutive years was contrary to guidelines and prior judicial direction
