Salaries of nuns, priests in aided schools taxable: Supreme Court
Staff Reporter - November 2024
New Delhi, Nov 8, 2024: The Supreme Court has ruled that the salaries given to Catholic priests and nuns teaching in aided schools come under the income tax rules.
Dismissing the appeals filed by 93 dioceses and congregations from Tamil Nadu and Kerala, a three-judge bench on November 7 said the vow of poverty taken by nuns and priests does not exempt them from paying taxes if their salaries come from government grants.
Senior advocates Arvind Datar and S Muralidhar, who appeared for the petitioners, said incomes of nuns and priests go to the congregation that runs the school and that these teachers personally do not acquire their salaries.
The petitioners explained that the nuns and priests have taken a vow of poverty and hence, the salaries earned by them by working as teachers in aided institutions are handed over to the diocese or convents. Therefore, the salaries are not accrued to them personally.
The counsel said the priests and nuns were protected by circulars issued from the 1940s and the department-initiated proceedings after someone wrote a letter to them in 2015.
The lawyer also submitted a few decisions of the Kerala High Court that have held that the family of a priest or nun, on his/her death, cannot claim compensation under the Motor Vehicles Act.
The petitioners explained that the salaries of nuns and priests get transferred to the congregation or diocese running the school, and the congregation submits returns wherever necessary.
The chief justice then pointed out that the nuns and priests receive the salaries in their personal account.
“Salary is received, but because of the vow of poverty, they say I will not retain the salary because in the diocese/parish, they cannot have personal income…But how does it affect the taxability of the salary? TDS has to be deducted.”
The chief justice stressed the need for a uniform application of law - that any person employed and receiving a salary would be subject to taxation.
“If there is a Hindu priest who says I will not retain this salary, and give the money for doing puja to an organization. But if the person is employed, he gets the salary, tax has to be deducted. The law is common for everyone. How can you say that it is not subject to TDS?”
“When the organization pays a salary, and it is treated as salary in the books of accounts of the organization, but that is not retained by the person and paid somewhere else, the application of money, either to the diocese or someone else, has nothing to do with taxability,” the chief justice said.
“This is salary in its true sense,” Justice JB Pardiwala said.
One of the petitioners said a person has to undergo rigorous training to become a nun or priest. At the final stage the person must take three sacred vows - of obedience, chastity and poverty.
Once the person becomes a member of a congregation, she or he cannot own any property and cannot have any income of her own.
“These sisters dedicate themselves as servants of God and spend their lives for charitable purposes and services like, education, health, rehabilitation of the poor, orphans and destitutes,” the petitioners’ lawyer said.
The petitioners challenged a Madurai bench of Madras High Court ruling that had rejected the petitioners’ plea for exemption from income tax, a relief enjoyed by aided missionary schools since 1944 until the federal government led by the Bharatiya Janata Party decided to impose tax deduction at source in December 2014.
The division bench heard the Income Tax Department’s appeals against a single bench judge’s decision that had allowed the writ petitions filed by Catholic religious institutions challenging steps taken for recovering tax on salaries paid to priests and nuns employed in aided educational institutions.
The single bench had accepted the case of religious institutions that since priests and nuns have taken a vow of poverty as per which they have to surrender their personal income to the Church/Diocese, no income is effectively accrued to them so as to make it liable for taxation. It further held that priests/nuns have suffered civil death as per Canon Law and renounced the world and therefore cannot be subjected to TDS.
The division bench of Justices Vineet Kothari and C V Karthikeyan held that the salaries were received by them in their individual capacity and that the subsequent surrender of their salaries to the religious institutions can only be treated as an application of income. The court further held that religious institutions cannot claim to have an overriding title with respect to the salaries at the source itself. (Courtsey: mattersindia.com)
Send your feedback to : onlinekeralacatholic@gmail.com
