TMI Blog2021 (8) TMI 435X X X X Extracts X X X X X X X X Extracts X X X X ..... mportance but also because, a nun and three individual priests are even otherwise before this Court raising the same challenge. We hold the writ petitions to be maintainable in the peculiar circumstances of the cases. Whether salaries paid to nuns and priests, who are employees of educational institutions, are liable for tax deduction at source? - Section 192 of the Act does not contemplate any exemption from the liability to deduct tax at source on the basis of the nature of calling, profession, or vocation of the person who receives the salary. The statute makes it an obligation upon the person who pays the salary to deduct tax, at the time when payment of salary is made. As per the statutory scheme, the sole focus under section 192 of the Act, upon the person paying the salary, is whether the income is chargeable under the head 'Salaries'. If the income payable will fall under the head 'Salaries', the statute attaches an obligation to the person paying the salary to deduct TDS. While deducting the TDS under section 192 of the Act, the person deducting it, is not obliged to or required to ascertain the nature of calling or vocation of the assessee or utilizat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... izing an underlying principle, according to us, has no basis. As mentioned earlier, under the scheme of the Act, there cannot be an exemption or exclusion of income from chargeability, otherwise than by the taxing statute. Since the statute has not provided for any such exemptions or exclusions for a certain category of persons like nuns or priests, the circulars cannot exclude or exempt the obligation created under section 192 of the Act. We are therefore of the firm view that the 1944 circular or even the 1977 circular cannot be construed as excluding tax deducted at source from the salaries received by the nuns or priests from their respective. Whether deduction of tax at source from the salaries payable to nuns or priests violates Article 25 of the Constitution of India? - While considering this contention, we bear in mind the perspective that the right under Article 25 is not an absolute or an unfettered right. Article 25 does not provide any immunity from taxation on the basis of religion. The right is subject to public order, which term has a wide connotation. One of the facets of public order is the law of the land. A valid piece of legislation and its compliance is pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... SRI.KURIAN GEORGE KANNANTHANAM (SR.) SRI.THOMAS GEORGE SRI.TONY GEORGE KANNANTHANAM BY ADVS. SRI.JOSEPH KODIANTHARA (SR.) SRI.V.ABRAHAM MARKOS SRI.ABRAHAM JOSEPH MARKOS SRI.ISAAC THOMAS SHRI.ALEXANDER JOSEPH MARKOS SHRI.SHARAD JOSEPH KODANTHARA RESPONDENTS/RESPONDENTS: BY SRI.CHRISTOPHER ABRAHAM, SC 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 JUDGMENT Bechu Kurian Thomas, J. Render unto Caesar the things that are Caesar's 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 wri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther 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 source during the pendency of the appeals, directed consideration of the issue of the 1944 and the 1977 circulars, by the CBDT and to place its views/decision before this Court for further consideration. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng to him, liable to be set aside. Referring to the circulars issued by the CBDT as an interpretation of the CBDT on the statutory provisions, the learned Senior Counsel further urged that Ext.P1 was binding upon all authorities under the statute as it was based on the principle of diversion of income by an overriding title in favour of congregation. He further submitted that the overriding title of the congregations over the salaries paid to the nuns and priests was the reason behind the concept enunciated in the circulars and since the same is not contrary to any statutory provision, the same was binding. By referring to the decisions in Mother Superior, Adoration Convent, Kanjiramattom v. D.E.O. Kottayam and Others (1977 KLT 303) and Oriental Insurance Co. v. Mother Superior S.H.Convent (1994 (1) KLT 868), it was further urged that on account of the civil death invited by the nuns and priests upon taking the oath of vow of poverty, payment to them can only amount to payment to the congregation and the individual remains invisible for collection of tax or TDS. 12. Adv. Kurian George Kannanthanam, the learned Senior Counsel, by inviting the attention of this Court to the co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court, clarified the position and the said clarification now holds the field. It was also argued that canon law cannot have predominance over the Act under any circumstances. He further submitted that even though by a mistaken notion, tax had not been deducted by the officers responsible for paying the salary all these years, the said mistake is liable to be corrected. He also invited Our attention to the decision in Joshi Technologies International Inc. v. Union of India and Others [(2015) 7 SCC 728] and canvassed that there cannot be any estoppel against law. It was also argued that the circular cannot override the statutory provisions under any circumstances whatsoever and in the absence of any independent exemption from tax, the appellants cannot rely upon the 1944 or even 1977 circular to claim exclusion from TDS. The learned standing counsel also invited our attention to the decision reported in Union of India v. Society of Mary Immaculate (Tamil Nadu), Madras [(2019) 412 ITR 545] wherein the Madras High Court had, after approving the judgment of the learned Single Judge impugned in this appeal, declared that the TDS is liable to be deducted from the salaries paid to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble in the peculiar circumstances of the cases. Q.(ii) Whether salaries paid to nuns and priests, who are employees of educational institutions, are liable for tax deduction at source? 19. Income tax is a tax on income. As tax is a compulsory extraction of money, however much one despises it, once income accrues, the compulsory extraction is inevitable, unless excluded by law. While appreciating the weighty contentions put forth by all the learned counsel, we also remind ourselves, apart from the above referred propositions, that, there are no equities in tax. 20. Section 4 of the Act creates the incidence of income tax on the total income of every person. Sections 4(1) and (2) of the Act reads as follows:- 4. Charge of Income-Tax.-( 1) Where any Central Act enacts that income-tax shall be charged for any assessment year at any rate or rates, income-tax at that rate or those rates shall be charged for that year in accordance with, and subject to the provisions (including provisions for the levy of additional income-tax) of, this Act in respect of the total income of the previous year of every person: Provided that where by virtue of any provision of this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y exemption from the liability to deduct tax at source on the basis of the nature of calling, profession, or vocation of the person who receives the salary. The statute makes it an obligation upon the person who pays the salary to deduct tax, at the time when payment of salary is made. As per the statutory scheme, the sole focus under section 192 of the Act, upon the person paying the salary, is whether the income is chargeable under the head 'Salaries'. If the income payable will fall under the head 'Salaries', the statute attaches an obligation to the person paying the salary to deduct TDS. While deducting the TDS under section 192 of the Act, the person deducting it, is not obliged to or required to ascertain the nature of calling or vocation of the assessee or utilization or application of the income by the assessee. 27. Chargeability to tax is not dependent on the manner of utilization of the income. The utilization of a person s income may be a window for claiming a deduction or a refund, but, it is irrefutably not a ground to claim an exclusion from deduction of tax at source. At the time of deducting tax at source, the exigibility to tax or the quantum to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... scharge an obligation after such income reaches the assessee, the same consequence, in law, does not follow. It is the first kind of payment which can truly be excused and not the second. The second payment is merely an obligation to pay another a portion of one's own income, which has been received and is since applied. The first is a case in which the income never reaches the assessee, who even if he were to collect it, does so, not as part of his income, but for and on behalf of the person to whom it is payable. In our opinion, the present case is one in which the wife and children of the assessee who continued to be members of the family received a portion of the income of the assessee, after the assessee had received the income as his own. The case is one of application of a portion of the income to discharge an obligation and not a case in which by an overriding charge the assessee became only a collector of another 's income . 30. The above principle was followed by the Supreme Court in Moti Lal Chhadami Lal Jain v. Commissioner of Income Tax, Delhi and Ors. [(1991) 190 ITR 1 (SC)] and Commissioner of Income Tax v. Sunil J.Kinariwala [(2003) 1 SCC 660]. The ob ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reted based on the provisions of that enactment. The legislation enacted by the legislature gains primacy and supremacy over the personal laws. In this context it would be fruitful to refer to the decision of the Full Bench of the Kerala High Court in George Sebastian v. Molly Joseph [1994 (2) KLT 387 (FB)] dealing with the order of the ecclesiastical tribunal granting divorce, this Court held that When there is a statute governing the area, the statute has primacy over any personal law in that regard. Personal law has relevance only to the above extent, vis-a-vis, the statutory law. In other words, personal law stands clipped to the extent statutory law has stepped . While affirming the above decision, the Supreme Court in Molly Joseph Alias Nish v. George Sebastian Alias Joy [(1996) 6 SCC 337] held that It is well settled that when legislature enacts a law even in respect of the personal law of a group of persons following a particular religion, then such statutory provisions shall prevail and override any personal law, usage or custom prevailing before coming into force of such Act. 35. The concept of civil death propounded by the canon law is not real. The exten ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and priests are part of the society. They can walk freely, speak freely and even indulge in most of the regular activities unrestricted, like any other individual. They enjoy all privileges that law confers upon other persons, including fundamental rights under Part III of the Constitution of India. They have the constitutional right of franchise. They are entitled to practice the profession of law, [see the decision in Bar Council of India v. Mary Tresa (2006 (2) KLT 210) medicine, teaching or any other profession of their choice. They act as managers of educational institutions, hospitals and other establishments. They enter into contracts for manifold purposes. In all these spheres, they act like any other living human. In such a scenario, we are of the firm view that the concept of civil death under the canon law, not only stands eclipsed but has no relevance vis-a-vis the taxing statutes. We are a nation governed by the rule of law. 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. The civil death contemplated under our rule of law is only the civil death provided for in s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e over to the congregation concerned there is an overriding title to the fees which would entitle the missionaries to exemption from payment of income tax. Hence, such fees or earnings are not taxable in their hands. These instructions may be brought to the notice of all the officers working in your charge. Yours faithfully Sd/ J. F. Sharma Secretary Central Board of Direct Taxes. Note: This exemption is restricted only to the individual missionary and not to the income of the missionary per se. Taxability of such an income gets transferred to the institution from the individual provided the entire income for the missionary is assessed with the income of the institution and satisfies all the rules governing Income Tax exemption given to the institution u/s12A. 40. It is explicit from a reading of the circular extracted above, that, though the caption mentions the subject as Fees of members of religious congregation , the recital portion of the circular refers only to the fees received by the missionaries in contradistinction to salary received by the nuns or priests. According to us, the circular of 1977 cannot apply to the salaries received by nu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which Shri Salve has referred is one which had been issued in exercise of powers conferred by section 119 of the Act has no significance insofar as the point under consideration, namely, whether the circular can override or detract from the provisions of the Act, is concerned, inasmuch as what Section 119 has empowered is to issue orders, instructions or directions for the proper administration of the Act or for such other purposes specified in subsection (2) of the section. Such an order, instruction or direction cannot override the provisions of the Act; that would be destructive of all the known principles of law as the same view would really amount to giving power to a delegated authority to even amend the provisions of law enacted by Parliament. Such a contention cannot seriously be even raised. 44. The contention that the practice had the effect of recognizing an underlying principle, according to us, has no basis. As mentioned earlier, under the scheme of the Act, there cannot be an exemption or exclusion of income from chargeability, otherwise than by the taxing statute. Since the statute has not provided for any such exemptions or exclusions for a certain category ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... riests, a contrary practise, which was contrary to the law of the land, cannot be permitted to be continued. As held in the decision in Joshi Technologies International Inc. v. Union of India and Others [(2015) 7 SCC 728] and several other decisions, there cannot be any estoppel against law. Hence we reject the said contention too. 47. We have been referred to the decision of the Madras High Court in Union of India v. Society of Mary Immaculate (Tamil Nadu), Madras [(2019) 412 ITR 545] where the Madras High Court, after taking note of the judgment of the learned Single Judge impugned in these appeals, agreed with the learned Single Judge of this Court. We too, agree with the conclusions reached by the learned Single Judge in the impugned judgment as well as in the aforecited decision of the Madras High Court. 48. In deference to the observations of the Madras High Court towards the concluding paragraphs, we hold that this judgment shall apply only with prospective effect and not for any earlier periods. This direction is issued not on the basis of any proclaimed right of the nuns or priests, but solely on account of the admission of the department that they had not, b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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