Tax is to be deducted at source from salary paid to teachers, who are nuns or priests of religious congregation: HC

Case details: Provincial Superior v. Union of India - [2021] 129 taxmann.com 154 (Kerala)

Judiciary and Counsel Details

• • S.V. Bhatti and Bechu Kurian Thomas, JJ.
  • Joseph Kodianthara, Sr. Adv., V. Abraham Markos, Abraham Joseph Markos, Isaac Thomas, Alexander Joseph Markos and Sharad Joseph Kodanthara, Advs. and others for the Appellant.
  • Shamsudheen V.K. and Christopher Abraham, Advs. and others for the Respondent.

Facts of the Case

Petitioner, based upon the circulars issued in the year 1944 as well as in 1977, claimed that salary received by the nuns and priests, and made over to the religious congregations were not chargeable to income tax. Thus, the tax was never deducted at source from the salary paid to the nuns and priests.

Petitioner submitted that as per the canon law, once a perpetual vow of poverty is taken, the nun or priest, as the case may be, undergoes a civil death, and thereafter, they are not ‘persons’ under the Act.

High Court held

The High Court held that section 192 does not contemplate any exemption from the liability to deduct tax at source based on the nature of calling, profession or vocation of the person who receives the salary and section 192 obliges every person who makes a payment under head ‘Salaries’ to deduct tax at source at rates prescribed without fail.

In spite of the vow of poverty undertaken by the nuns or priests, they work for gain and receive salary, irrespective of whether the ultimate beneficiary is somebody else or not, the salary partakes of the character of income received by the nuns and priests from the Government. The concept of civil death is alien to the Income-tax Act and the same cannot be incorporated into the statute book through any mode of interpretation.

A reading of section 119 will make it explicit that the power to issue circular or instruction by the CBDT is only for the ‘proper administration of the Act. The power to exclude any person or category of persons from the purview of tax can be done only through the mandate of the statute.

The statute has not recognized any exclusion of tax on the income of nuns or priests. In such a perspective, the CBDT could not have issued any circular in exercise of the powers under section 119 to confer an exemption to the salaries received by the nuns or priests from the rigour of income tax. The 1944 Circular or even 1977 circular, dated 05-12-1977 cannot be construed as excluding tax deducted at source from the salaries received by the nuns or priests from their respective establishments.