Vineet Kothari, J. - (1.) Whether the Income Tax Law is a-political, a-religious in character, whether the character and attributes of the recipient of an income determines the taxability or the character of the receipt of income and whether the provisions for withholding of tax or deduction of tax at source are dependent upon the final taxability of the sum paid or not, are the background cords, in which, we are called upon to decide a few important questions of law arising in the present Writ Appeals filed by the Union of India and Income Tax Department, arising from the judgment of the learned Single Judge, by which he allowed the writ petitions filed by the respondent/assessees, the Christian Religious Institutions, which run and control a large number of educational institutions, Convents or Schools in the State of Tamil Nadu and who represent the cause of the Teachers working in such Schools, mainly the Nuns, Sisters, Missionaries and Fathers, who are also Teachers in such Schools of the various subjects.
(2.) The crux of controversy is that the Nuns, Sisters, Priests or Fathers, who also render their services as Teachers in these schools which receive Grant-in-aid from the State Government under the Grant-in-Aid Schemes formulated by the State to the extent of their full salary, claim that they are bound by the Canon Law for their vows of poverty to the Christ and that they cannot be taxed in respect of the Grant-in-Aid or salary received from the State Government by respective school or educational institutions and now directly transferred to the individual Bank Account of the Teachers under ECS Scheme, as the receipt of salary in their hands entirely belongs to the Institution, Church or the Religion and having taken such vows of poverty etc. in their Canon Law, they have suffered a civil death and renounced the world and therefore, they cannot be subjected to the deduction of tax at source as stipulated in Section 192 of the Income Tax Act, 1961, and for which, in the recent past, the Income Tax Department instructed the concerned authorities of the State Government to deduct income tax at source on the payment of salaries made to these Teachers, nuns, etc. along with other Teachers also who are employed in such Schools and consequently, the relevant Instructions of the Income Tax Department in this regard deserve to be quashed.
(3.) The learned single Judge, in the judgment under appeal rendered on 22.12.2016 in W.P.Nos.37565 to 37567 of 2015, etc. (Institute of the Fransican Missionaries of Mary v. Union of India and Others), allowed the said writ petitions upholding the aforesaid contention of the Assessee Institutions and the Missionaries, discussing the Canon Law in detail and held that no income tax can be deducted at source from the salaries and other monetary benefits paid to these 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. While doing so, the learned Single Judge held that in terms of Article 26 of the Constitution of India, there is a guarantee to religious denomination, a right to acquire its own property and to administer such property in accordance with law and that the administration of the property by a religious denomination has thus been placed on a different footing from the right to manage its own affairs in matters of religion. The latter is a fundamental right which no legislature can take away, whereas the former can be taken away by law which the legislative can validly impose. The learned single Judge proceeded to hold that an action by an authority which impinged upon the right to practice a religion as guaranteed under Articles 25 and 26 of the Constitution of India has to be held to be as not sustainable.;