Kerala HC follows Madras example, rules 'dead' priests, nuns pay tax
By Gajanan Khergamker
Underlining its position on the issue of taxation and that it was mandatory by law for priests and nuns to pay taxes that were valid by law, the Kerala High Court pronounced the verdict quoting the Bible verse, "Render unto Caesar the things that are Caesar's, and unto God the things that are God's." The Kerala High Court's most recent order on the issue of Tax Deduction At Source (TDS) that remains unpaid since 1944, issued by Justice SV Bhatti and Justice Bechu Kurian Thomas, is a bold move to interpret the reach of Canon Law and the Constitutionality of Tax Laws but, sound as it may seem, the ruling is expected to be challenged by the petitioners in Supreme Court. The move is a given considering it is the logical trajectory of legal processes when one's petition doesn't find favour in a High Court. The ruling, for obvious reasons, isn't populist, especially for the community in question.
 |
| Image for representational purposes only |
Of relevance here is the same Kerala High Court's ruling through which, in July 2019, it dismissed a petition challenging the constitutionality of the Catholic Church’s Code of Canons and its applicability in India, even imposed a cost of Rs 25,000 on the petitioner.
The petitioner M S Anoop wanted the court to declare that the Code of Canons, that confers power upon the Vatican over properties of churches situated in India, as unconstitutional and "opposed to the country’s sovereignty". The petitioner also wanted the court to decree that public trusts should administer church properties. Therefore, the alienation and transfer of those assets should be only in accordance with the leave of the court, obtained under Section 92 of the Code of Civil Procedure, 1908.
The bench of Chief Justice Hrishikesh Roy and Justice A K Jayasankaran Nambiar had observed, “…it is necessary to observe at the outset that India is a secular country which guarantees fundamental freedom under Article 26 of the Constitution, to every religious denomination to own and acquire movable and immovable properties, provided such administration of properties is in accordance with the Indian Laws.”
It stated that as long as the administration of the Church properties was done in accordance with Indian laws, the Court’s intervention would not be warranted, except in situations contemplated under Section 92 of the Code of Civil Procedure. Even if the courts were to interfere, the High Court stated, the aggrieved would have to first approach a Civil Court.
It observed, “In the instant case, the litigant is not an aggrieved party who belongs to the particular denomination. Moreover, this is also not the appropriate court to raise grievance pertaining to Section 92 of the Code of Civil Procedure. The Court’s perception here is that motive of this PIL is extraneous and perhaps cheap publicity.”
The management and administration of Church properties without the interference of the State was guaranteed by the Constitution of India under Article 26 that pertained to Freedom to manage religious affairs. It provided that every religious denomination had the Right to form and maintain institutions for religious and charitable intents; the Right to manage its own affairs in the matter of religion; the right to acquire immovable and movable property and the right to administer such property according to the law and subject to morality, health and public order.
The attempt to bring the administration under the control of the State without a violation and in the absence of due process, without locus standi and by - first - approaching a Civil Court, was swiftly rebutted by the Kerala High Court that upheld the Church's right guaranteed under the Constitution of India and even rapped the petitioner by fining him for the 'frivolous' PIL. That the decision was not questioned in appeal to the Supreme Court, even if it were ultimately defeated, could well have undermined the learned High Court's seemingly populist ruling. But, better sense prevailed and it didn't happen.
Now, in 2021, the Kerala High Court bench of Justice SV Bhatti and Justice Bechu Kurian Thomas issued the not-so-popular order on 49 appeals filed by religious congregations, nuns and priests including the Provincial Superior, Nirmalrani Provincial House, Idukki who submitted the salaries received by the nuns and priests and made over to the religious congregations were not chargeable to income tax, and tax was never deducted at source from the salaries paid to them. They maintain nuns and priests are not entitled to have any income or hold any property and all their properties, assets including salary and pension, belong or accrue to the religious congregation. They went on to maintain that CBDT circulars of 1944 and of 1977 supported their claim.
As per the Canon Law, the petitioners contend that once a perpetual vow of poverty is taken, the nun or priest, undergoes a 'civil death', and thereafter, they are not 'persons' under the Act. The High Court maintained that the CBDT circular pertained to fees received by missionaries and that nuns and priests, who had undergone a 'civil death', continued to receive 'salaries'. Also, the concept of a 'civil death' propounded by Canon Law is not real and the extent of Civil Death under Canon Law was limited in its extent and operation. The fiction under the Canon Law, cannot be extended to cover all situations in the life of a nun or a priest. It cannot be extended to cover situations governed by the statutes enacted by the legislature unless the same is recognized by the provisions of the statute.
"None of the provisions of the Income Tax Act recognize the concept of civil death. Thus the concept of civil death has no application under the Income Tax Act," observed the court. The government submitted that the CBDT circular of 1944, as well as that of 1977, deal with and refers to the income earned by 'missionaries' as 'fees', in contradistinction to the salary earned by nuns or priests. The Canon Law cannot have predominance over the Income Tax Act under any circumstances.
The court observed it was the statutory duty of the person paying any income as salary to another, to deduct, at the time of making the payment, income tax at the rates in existence. None of the provisions provides an exemption for any category of persons, based on their nature of vocation or occupation. Section 192 of the Income Tax Act, which deals with Tax Deduction At Source, obliges every person who makes a payment under the head ‘Salaries’ to deduct tax at source at the rates prescribed without fail.
"The legislation enacted by the legislature gains primacy and supremacy over the personal laws," said the court.
For all practical purposes, nuns and priests are part of 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 the law confers upon other persons, including fundamental rights under Part III of the Constitution of India. 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. The concept of Civil Death under the Canon Law, not only stands eclipsed but has no relevance vis-a-vis the taxing statutes," said the bench.
"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 section 108 of the Indian Evidence Act, 1872. Thus, the reliance upon the concept of civil death of nuns and priests under canon law, to avoid deduction of tax at source, cannot be of avail to the appellants," it added.
The Kerala High Court bench relied upon a similar petition Union of India v. Society of Mary Immaculate (Tamil Nadu), wherein the Madras High Court had recently declared that the TDS is liable to be deducted from the salaries paid to the nuns or priests. It had held that "Section 192 has nothing to do with religious leanings of teachers who are paid salary by State in form of Grant-In-Aid. It is immaterial whether they are Nuns, Sisters or Missionaries or normal persons serving as Teachers in Government Aided Schools, their religious character or bindings have no effect on uniform application of Section 192.
"Salary is paid under contract of employment with which Educational Institution or Church or Diocese who are not even privy to such contract of employment qua the State Government. Moreover, State Government as a Payer of salary under Income Tax Act is not bound by any Religious tenets or provisions of Canon Law. It has nothing to do with Religious freedom guaranteed under Articles 25 and 26 of Constitution of India. Vows of poverty taken by Nuns and their surrender to Church or Diocese would not affect taxability of salary from State Govt. It is nature and character of receipt as salary at time of payment, which is important under the Act.
"Provisions of Income Tax Law are dry, plain and simple, a-political, non-religious in character. State Government, as a payer of salary under Income tax Act, is not bound by any religious tenets or provisions of Canon Law.
Therefore, neither Income Tax Department nor State Governments has anything to do with religious character of Institution and Teachers or Nuns or Missionaries and, therefore, they cannot take a stand of not making tax deduction at source in view of Canon Law."
Interestingly, if the Kerala High Court bench judgment on the issue of TDS issued by Justice SV Bhatti and Justice Bechu Kurian Thomas is appealed against in Supreme Court, the issue of non-payment of taxes under the cloak of religious freedom will be tackled by the highest court of the land and a judgment in the regard be binding on all courts and across India.
For the Apex Court to tackle the issue, if not Suo Motu in appeal, will be taking the matter by its horns and it must, as Legislature, bound by the people, tends to be populist and drag its feet on touchy issues that need to be tackled firmly and without fear or prejudice, will tend to dodge the issue that has dragged on for too long. If the Supreme Court does, in fact, rule upon the issue and uphold the Kerala High Court judgment, select states may legislate to work around the order, even go the Ordinance way to appease, as usual.
Follow The Draft: Facebook | Twitter | Instagram | YouTube
