Last week, a divisional bench in the High Court of Kerala upheld the decision of the Single Chamber of the same High Court which made priests and nuns of religious congregations liable to withholding tax (TDS) of their taxes. on income for their income collected by the government. chessboard.
“Give back to Caesar the things that are Caesar’s, and to God the things that are God ‘s,” said the High Court, citing the Bible.
Now the state’s Catholic religious congregations are preparing to challenge this order in the Supreme Court.
“We have now decided to appeal the order to the Supreme Court of India,” said Father Jacobi Sebastian, president of the Kerala Conference of Major Superiors. quoted as saying in the reports.
Context of the case
A 2014 income tax circular ordered district treasurers to ensure that TDS was implemented for nuns or priests in religious congregations. This circular was challenged by 49 appellants in the High Court of Kerala on several grounds, including interference with the freedom to profession, practice and propagate religion, which is a fundamental right guaranteed by Article 25 of the Indian constitution and the rule of canon law (Christian law of persons) under which members suffer a “civil death”.
The appellants also sought protection under earlier circulars of 1944 and 1977 from the Central Commission on Direct Taxes (CBDT).
Highlights of the judgment
Statutory law over canon law
The appellants had argued that when a member joins a religious congregation, then under canon law he must take certain vows. Upon taking these vows, new members suffer a “civil death” whereby any income earned by members would automatically accrue to the religious congregation and not to the individual member. As a result, an individual member was “invisible” to be responsible for TDS.
The High Court, while rejecting their position, categorically declared that the law of the land had primacy and supremacy over all personal law. The Income Tax Act, 1961, would therefore take precedence over canon law. The Income Tax Act did not recognize the concept of “civil death”.
The court also stressed that despite a civilian death, these members still engaged in regular activities like any other individual and that they too enjoyed all the rights conferred on them by the Constitution.
They had the right to franchise, the right to practice the profession of law, medicine or education; they also ran institutions and entered into contracts like any other person.
In addition, the judiciary stated that Article 192 of the Information Technology Act does not contemplate any exemption from the liability of TDS due to the nature of the call, profession or vocation of the person who receives the salary.
If income was received under the heading “wages”, then it was subject to TDS. The court further ruled that the sole use of the salary could be subject to an income tax return at the end of the fiscal year.
No violation of fundamental rights
The High Court clarified that Article 25 does not provide for tax immunity on the basis of religion. It further specified that Article 25 was subject to public order. Public order includes the law of the land. Since the Income Tax Act 1961 is a valid law, the collection of income tax would not infringe any fundamental right.
Clarification from previous CBDT circulars
The appellants argued that the 1944 and 1977 circulars exempted these members of the TDS. The 1977 circular of the CBDT mentions “the fees of members of the religious congregation” as opposed to the salaries received by nuns or priests on a “personal” basis. In addition, another clarifying circular was issued by CBDT in 2016 which specified that the 1977 circular did not apply to “salaries and pensions received by nuns or priests”.
Therefore, the High Court declared that the 1977 circular was not valid in this circumstance. In addition, the court also argued that rules or instructions issued under the provisions of a statutory law could not prevail over the principle law itself.
He also mentioned that Article 119 of the Information Technology Law, under which such rules can be issued, explicitly stipulated that such rules could only be issued for the “good administration of the law”.
Therefore, these circulars did not have the power to exclude certain categories of people from paying taxes. This type of exclusion can only be done by means of the main law.
Since the IT law does not exempt anyone from paying income tax, any subsequent circular issued could not provide for such exceptions either.
The Madras High Court in 2019 also delivered a judgment on similar lines which was later suspended by the Supreme Court. Religious congregations in Kerala have decided to take the matter to the Supreme Court.