A two-judge bench of the Madras High Court has held that the provisions of the Income Tax Law are apolitical and areligious in character, and salaries and grants-in-aid to nuns and missionaries are liable to attract tax deducted at source (TDS) under the Income Tax Act.
The bench comprising Justice Vineeth Kothari and Justice C V Karthikeyan has clarified that the provisions of the Income Tax Act are areligious and apolitical in nature and therefore, the cannon law is not binding in case of income tax matters.
“In our opinion, the provisions of Income-Tax law are dry, plain and simple, apolitical and areligious in character,” said the two-judge bench of the Madras High Court, in a recent order on a writ appeal filed by the Union of India and the Income-Tax Department against the Society of Mary Immaculate and the State’s Directors of Treasuries and Accounts, School Education and Elementary Education.
The division bench overruled the 2016 ruling by a Single Judge of the Madras High Court on a writ petition by the Institute of the Fransican Missionaries of Mary against the Union of India and others, which had allowed the writ petitions, and had said TDS was not applicable on salaries and other benefits given to nuns and priests working in teaching institutions.
“In our opinion, with great respect, the learned Single Judge has taken an impermissible route of Canon Law to interpret the provisions of Income-Tax law and holding such tax law to be of secondary importance, vis-a-vis the Canon Law applicable to individual teachers belonging to the class of nuns, missionaries or sisters,” the High Court held, adding that this judgment would be applied prospectively and not for the past period.
Coming to the facts of the case, the Nuns, Sisters, Priests or Fathers, who also render their services as Teachers in these schools which receive Grant-in-aid from the State Government under the Grant-in-Aid Schemes formulated by the State to the extent of their full salary, claim that they are bound by the Canon Law for their vows of poverty to the Christ and that they cannot be taxed in respect of the Grant-in-Aid or salary received from the State Government by respective school or educational institutions and now directly transferred to the individual Bank Account of the Teachers under ECS Scheme, as the receipt of salary in their hands entirely belongs to the Institution, Church or the Religion and having taken such vows of poverty etc. in their Canon Law, they have suffered a civil death and renounced the world and therefore, they cannot be subjected to the deduction of tax at source as stipulated in Section 192 of the Income Tax Act, 1961.
Recently, the Income Tax Department instructed the concerned authorities of the State Government to deduct income tax at source on the payment of salaries made to these Teachers, nuns, etc. along with other Teachers also who are employed in such Schools and consequently, the relevant Instructions of the Income Tax Department in this regard deserve to be quashed.
The bench also held that there is no iota of doubt that the provisions of the Sections 15 and 192 of the Act have nothing to do with religion or any other special status of the person receiving the income described to be salary by the payer of the same.
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