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2015 (8) TMI 431 - KERALA HIGH COURTRequirement to deduct tax at source from payments by way of salary/pension made by the Government, to persons who are members of religious congregations - Held that:- while there may be instances where the receipt of fees or other earnings by members of religious congregations do get diverted by overriding title to the congregation, the proposition is by no means an absolute one that is applicable in all cases of earnings by a member of the religious congregation. The applicability of the concept would have to be tested on the facts of each case, by examining the nature of the receipt by the assessee. Viewed in that light, the impugned instructions of the Income-tax Officers, in these cases, to deduct tax at source from payments by way of salary and pension to members of the religious congregations, cannot be said to be contrary to the Circulars and Instructions issued by the Central Board of Direct Taxes. They are simply instructions issued in situations not covered by the Central Board of Direct Taxes Circular/Instructions. Further, the Central Board of Direct Taxes Circulars/Instructions cannot be treated as encompassing receipts by way of salary and pension, as that would render the said Circulars and Instructions contrary to the law declared by the courts on the concept of diversion of income by way of overriding title. For reasons that as already stated, the payments involved in the instant cases accrued to the members of the religious congregations as their income and the subsequent diversion of that income to the religious congregation concerned was only a case of application of that income. The impugned instructions of the Income-tax Officers that direct the persons responsible for paying salary and pension to the members of religious congregations, to deduct tax at source in accordance with section 192 of the Income-tax Act cannot be said to be illegal. The writ petitions, in their challenge against the said instructions, fail and are accordingly dismissed. The petitioners had, taking note of the instructions issued by the Income-tax Officers to deduct tax at source from salary payments, approached the Income-tax Officers under section 197 of the Income-tax Act for a certificate for non-deduction of tax at source. When the said application was rejected, the petitioners approached the Commissioner of Income-tax through a revision petition filed under section 264 of the Income-tax Act. The said revision applications were, however, rejected by holding that the salary of the teachers was received by them and formed part of their income for the purposes of the Income-tax Act. It was found that the voluntary foregoing of the income in favour of the religious congregation of which they were members, was an instance of application of income and not a diversion of income by overriding title. In the aforementioned writ petitions, the petitioners impugn the said orders passed by the authorities under the Income-tax Act. In the light of my findings on the issue, these writ petitions also fail, and are accordingly dismissed. All the writ petitions are dismissed and the stand of the Income-tax authorities that tax is required to be deducted at source from payments by way of salary/pension effected to persons who are members of religious congregations, is upheld. - Decide against assessee.
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