The Madras High Court has made it clear that no tax can be deducted at source from the salaries and other monetary benefits given to nuns and priests working in various teaching institutions established and administered by the Institute of the Franciscan Missionaries of Mary and similar Christian organisations.'

The high court was deciding upon a batch of 74 petitions seeking quashing of an order of Principal Chief Commissioner of Income Tax, Chennai, and consequential circular insisting on the recovery of tax at source (TDS) from nuns, fathers and priests. Justice TS Sivagnanam, in his order, said, "The Principal Chief Commissioner of Income Tax who was bound by the circulars issued by the Central Board of Direct Taxes (CTBT) in 1977 exempting the missionaries from payment of tax, has ignored and issued the above circular (which) has to be definitely set aside."

The judge cited various Supreme Court decisions and said the Income Tax Department was duty bound to examine as to whether such income reaches the nuns and priests as their income. "...the revenue cannot dispute the fact that on account of vows taken by the nuns and priests, especially the vow of poverty, the income has to reach the congregation to which they belong. Therefore, without considering such aspect merely by referring to the fact that the salary is paid to the individuals on account of their personal skills appears to be applying an incorrect test.

"As pointed out in Sital Das/Tirtha Das (cases), there may be obligations in other cases but what is required to be seen as the nature of obligation which alone is the decisive factor. If this obligation is taken into consideration, it is clear that by virtue of the precepts of Canon Law, the salaries cannot be treated as income in the hands of the priests and nuns," the HC said.

The judge, while referring to another judgment of the apex court, said, "It was held that unless they received salary, the question of payment of contribution towards the employees provident fund would not arise." The judge said, "Revenue (department) has not been able

to point out as to the incorrectness of the circulars issued by the CBDT nor it has been demonstrated as to how and in what manner it is conflict with any decided case." "In such circumstances, the circulars issued by the CBDT are binding upon the authorities...as long as these circulars and clarifications having not been withdrawn or modified, these have to be followed by the officers subordinate to the Central Board.

"For all the above reasons, all the writ petitions are allowed and it is held that no tax can be deducted at source from the salaries and other monetary benefits effected to persons who are the members of the religious congregation and it would be sufficient if the head of the institution concerned certifies the names of the staff members, who were members of the religious body and the period during which they have served and the designation of the post," the judge said.