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The Correspondent, Holy Cross Primary School Versus The Central Board of Direct Taxes, The Principal Chief Commissioner of Income Tax, The Income Tax Officer, The Director of Treasuries and Accounts, The Pay and Accounts Officer, The District Treasury Officer, The District Elementary Educational Officer, The Assistant Elementary Educational Officer

2016 (6) TMI 430 - MADRAS HIGH COURT

Deduction of TDS from the salaries of the Religious Nuns in the service of the petitioners' school - petitioners are in Catholic Institutions, religious Priests and Nuns who have been employed in the respective Schools/Colleges owned and administered by Dioceses, Congregation or institutions - whenever salaries are directly paid by the Government to the concerned religious Priests or Nuns, who are working in the schools owned by Catholic Dioceses and Congregation? - Held that:- When the Governme .....

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receipt of such affidavit and on their satisfaction would give a certificate or a letter to the Government of Tamil Nadu that they need not deduct TDS insofar as the Priests and Nuns are concerned because they are not paying salary to the individual which are now being paid only in the name of the Congregation or Diocese only. - Decided in favor of petitioners / assessee. - W.P(MD).Nos.21172 of 2015 to 21181 of 2015 - Dated:- 3-3-2016 - B. Rajendran, J. W.P(MD).Nos.21172 of 2015 to 21181 of 2015 .....

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and W.P(MD).No.4307 of 2016 and W.MP(MD).No.3836 and 3837 of 2016 and W.P(MD).No.4308 of 2016 and WMP(MD).No.3838 and 3839 of 2016 and WP(MD).No.4309 of 2016 and WMP(MD).No.3840 and 3841 of 2016 and W.P.(MD).No.4310 of 2016 and WMP(MD).No.3842 and 3843 of 2016 and WP(MD).No.4262 of 2016 and WMP(MD).No.3798 and 3799 of 2016 and W.P(MD).No.4311 of 2016 and WMP(MD).No.3844 and 3855 of 2016 and W.P(MD).No.4467 to 4478 of 2016 and WMP(MD).Nos.4011 to 4034 of 2016 For the Petitioners : Mr. Isaac Moha .....

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the service of the petitioners' school and quash the same. 2. By consent, all these cases are taken up for final disposal. 3. The only point which has been raised in all these Writ Petitions is that all these petitioners are in Catholic Institutions, religious Priests and Nuns who have been employed in the respective Schools/Colleges owned and administered by Dioceses, Congregation or institutions. The only point which is raised is whenever salaries are directly paid by the Government to th .....

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es are already exempted by the Income Tax Department from payment of income tax. Therefore, the salaries given to the Priests and Nuns when they are added to the income of the said Congregation or Diocese it is not taxable where such income from the religious Priests and Nuns now, added to the congregation income they become non-taxable. Whereas, when it is received by the concerned Priests or Nuns in their individual name, TDS is sought to be deducted by the institution but ultimately the incom .....

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977, a resolution has been passed by the Income Tax Department to this effect. Similarly, the parties have also relied upon the communication of the income Tax Department pursuant to Division Bench order seeking for exemption. Therefore, the only contention is that the TDS should not be deducted insofar as to the religious Priests and Nuns salary, which have been paid by the Government. Now, they would contend that every individual Father or Sister or the religious Priests or Nuns are preferred .....

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ducting TDS, so that the entire amount will go to the congregation which is already exempted from payment of Tax and the individuals also have the benefit of it. It was represented before Income Tax Department as well as the Government that they will not have any claim, if the amount is directly paid to the said congregation. Therefore, in view of this undertaking they would now only contend that the common order be passed in all these petitions. 5. The Income Tax Department is represented by th .....

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Court that they have no objection in respect of the payment of salary directly to the congregation or Diocese, provided individual users have to file affidavits before them as well as Income Tax Department. At the same time, the Department Viz., Income Tax Department, on the basis of affidavit filed by the individuals has to give a letter to the Government exempting them from deducting the TDS insofar as it relates to the salary fo the Priests and Nuns which are being directly paid to the Dioces .....

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e respective Congregation or Diocese only and when the institution is already exempted from payment of income tax, why the salary which is given to the individuals should be deducted for TDS as the ultimate beneficiary is only the Diocese or the Congregation which has already been exempted from payment of income tax. They are now sticking upon the only point that none of the Priests and Nuns though they work under the Government and receive the salary as teaching or non-teaching staff or in any .....

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to the society had been considered. This Circular has been considered subsequently by the Central Board of Direct Taxes in the year 1977 in their proceedings dated 5th December, 1977 which I will refer it to later. When the Act came into force in 1971 as early as in 1963, the Government of India in a communication issued by the Commissioner of Income Tax, Bombay City in reference No.Dat/284 (287)/60, which is addressed to one of the Solicitors in Bombay, it has considered the claim made by the .....

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liable to be taxed. Therefore, immediately after the advent of the very Act itself way back in the year 1963 the Government of India thought it fit to withdraw the appeal filed by the department as against the deduction of payment of tax on the salary of Priests of the Archdiocese of Bombay. 10. Thereafter, the Commissioner of Income Tax, Madras, in his proceedings in R.C.No.230..11(75), dated 30.01.1969 addressed to the Secretary, Madras Catholic Educational Council on the representation of th .....

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the year 1969 has clearly considered that once the salary received by the Priests and religious institution staff are only paid or to be passed it over to the Church authority, whose income tax is exempted from tax that amount will not be taxed. In that very letter itself a note has also been appended that in the light of the communication cited the religious members employed in schools are exempted from payment of professional tax as well. 11. Thereafter in an instruction by the Government of .....

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the missionaries are to be made over to the congregation concerned there is an over-riding title to the fees which would entitle the missionaries to exemption from payment of tax. Hence such fees of earning are not taxable in their hands. Therefore, way back on 05.12.1977 itself the Board of Tax Department itself has clearly stated that when it reaches the Congregation such fees or earnings are not taxable. 12. Therefore, from the year 1944 to 1977, the Income Tax Department on various occasions .....

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their status as a Priest and Nuns but having been duly appointed as teacher or any other capacity in the institutions. They receive the salary but they pass it on to the Diocese according to them. If the money is directly paid to the individuals, necessarily TDS has to be deducted. But, the amount is being paid by them to the congregation which is the ultimate beneficiary, which has already been exempted from payment of Tax and therefore unnecessarily TDS should not be deducted. Therefore, they .....

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cifically stated that they have agreed to file necessary affidavit or letters to say that inspite of bringing the salary in the individual name of the Priests and Nuns it would be directly paid to the concerned Congregation and they are ready to send the letter to all the officers concerned viz., the Income Tax Department and to the concerned District Educational Officer, District Elementary Educational Officer, Pay and Accounts Officer and Accountant General. 14. The learned counsel for the Inc .....

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not be any evasion of tax and as I have rightly pointed, in this connection, already the department has taken a stand way back in the year 1944 to the circular in 1977 whenever ultimately the beneficiary is the Congregation which has been exempted then they need not pay tax. In this connection, a reference is also made to a Division Bench judgment of the Kerala High Court in an identical matter wherein also interim order has been passed but a reference has been made to place this matter before t .....

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