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IN THE HIGH COURT OF KERALA AT ERNAKULAM
S.V. BHATTI, BECHU KURIAN THOMAS, JJ.
The Provincial Superior, Nirmalrani Provincial House (Franciscan Clarist Congregation) & Ors. - Appellants
Versus
The Union of India, Rep. by The Secretary, Ministry of Finance & Ors. - Respondents
WA Nos. 410, 411, 414, 426, 427, 428, 429, 430, 434, 435, 436, 440, 441, 444, 445, 446, 447, 448, 451, 465, 466, 468, 469, 473, 474, 475, 476, 477, 492, 493, 494, 495, 496, 497, 498, 499, 507, 508, 509, 510, 511, 512, 513, 514, 515, 516, 517, 518 & 701 of 2015
Decided On : 13-07-2021
Nuns and priests – Tax deduction from salary - Concept of civil death - vow of poverty - liability of tax deduction at source from the salary paid to teachers who are nuns or priests of the religious congregations - learned Single Judge dismissed the writ petitions by concluding that tax is liable to be deducted at source from the salary paid to the teachers, who are nuns or priests - Whether the circulars of 1944 and 1977 are valid? If yes, do they exclude TDS from the salaries of nuns or priests? Whether deduction of tax at source violates Article 25 of the Constitution of India? Whether the non-deduction of tax at source from the salaries of nuns or priests for more than 76 years confers a right against such deduction?
Finding of the Court:
Writ petitions to be maintainable in the peculiar circumstances of the cases 0 it is the statutory duty of the person paying any income as salary to another, to deduct, at the time of making the payment, income tax at the rates in existence.0 None of the provisions referred to above provide any exemption for any category of persons, based on their nature of vocation or occupation - when the incidence of tax under the Act falls on every person based upon his income, the deduction of tax at source under section 192 of the Act must be effected from every person who receives any income as salary, if they fall within the purview of chargeability - section 192 of the Act obliges every person who makes a payment under the head ‘Salaries’ to deduct tax at source at the rates prescribed without fail.0 None of the provisions of the income tax Act recognize the concept of civil death. Thus the concept of civil death has no application under the Income Tax Act. vow of poverty when eclipsed by the receipt of income, renders the civil death contemplated under the religious calling also, in a state of eclipse for the limited application of statutory obligations - Concept of civil death under the canon law, not only stands eclipsed but has no relevance vis-a-vis the taxing statutes0 principle of diversion of income by overriding title has no application to the salary paid to nuns or priests by the Government or any other employer - circular of 1977 cannot apply to the salaries received by nuns or priests from the Government or aided institutions. Further, the clarification issued by the CBDT in 2016, pursuant to the direction by this Court in these appeals, mentioned by us as a prelude in this judgment, states in unmistakable terms that the circular does not apply to salaries and pensions received by the nuns or priests.
Result: Appeals dismissed
JUDGMENT :
Bechu Kurian Thomas, J.
Render unto God the things that are God's."
We are reminded of the above teachings of Jesus Christ as written in the synoptic gospels of the Bible, while we consider an engrossing question on the liability of tax deduction at source from the salary paid to teachers who are nuns or priests of the religious congregations. The learned Single Judge dismissed the writ petitions by concluding that tax is liable to be deducted at source from the salary paid to the teachers, who are nuns or priests. Hence this batch of writ appeals, at the instance of writ petitioners.
2. Few of the nuns and priests indulge in pedagogy apart from their religious calling. Those pedagogues are paid salaries. Under their religious covenant, nuns and priests bind themselves to a vow not to own property. At the time of initiation into their religious calling, they claim to have taken that vow -known as the vow of poverty. Therefore, the income received by them is handed over to their religious congregation.
3. From 1944 until the filing of the writ petitions in 2014, the salary paid to the nuns or priests by the Government was admittedly not subjected to tax deduction at source (for brevity ‘TDS’). (It is admitted that during the pendency of the writ petition as well as these appeals, such salary has not been subjected to TDS). Appellants relied upon circulars issued by the Central Board of Direct Taxes (‘the CBDT’ for short) in the year 1944 as well as in 1977, to claim exemption from TDS. According to the appellants, based upon the circulars so issued, salary received by the nuns and priests, and made over to the religious congregations were not chargeable to income tax, and tax was never deducted at source from the salary paid to the nuns and priests.
4. Surprisingly, in the year 2014, Income Tax Officers informed District Treasury Officers that proper deduction of TDS must be effected in the case of employees of Government or aided institutions, who are members of religious congregations receiving salary from the Government exchequer. The aforesaid communication resulted in the writ petitions challenging the direction issued by the Income Tax Officers. Writs of mandamus were sought to direct the disbursement officers not to deduct TDS from the salary of teachers who are members of the petitioners' congregations. Three individual priests and one nun had also filed separate writ petitions.
5. Controverting the claim of the petitioners, statements were filed by the second respondent in all the writ petitions, pleading that the CBDT circular does not have the effect of exempting deduction of TDS from the salary paid by the Government to the teachers through their respective institutions. It also stated that the nuns and priests receiving salary from Government are to be considered as Government employees and that they are given salary, pension, and even gratuity, on par with other Government employees. It was further pleaded that if any person is entitled to exemption from payment of income tax, the same is not a ground for not deducting TDS. Respondents claimed in their statement that the entitlement of salaried employees for exemption or deduction from tax could at the most be a ground for seeking a refund but not for avoiding TDS.
6. The learned Single Judge by the impugned judgment dismissed the writ petitions against which these appeals were preferred.
7. We heard the arguments of Senior Advocate Sri. Joseph Kodianthara duly instructed by Adv. Abraham Joseph Markose, Senior Advocate Sri. Kurian George Kannanthanam instructed by Adv. Tony George Kannanthanam and Adv. A. Kumar, on behalf of the appellants. We also heard the Senior Standing Counsel Sri. Christopher Abraham, on behalf of the Income Tax Department.
8. We must mention at this juncture that, at the time when the writ appeals came up for admission, this Court had, on 09.03.2015, while interdicting deduction of tax at sou
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