The case can be traced back to 2015, when the Tamil Nadu Income Tax Department instructed state-funded institutions to deduct tax from salaries of nuns and priests employed there. But the church officials moved HC where a single judge bench dismissed the order.
The primary argument against taxation of their incomes was that these nuns and priests had renounced the world and had taken a vow of poverty. Therefore, their salaries were salaries were surrendered to the church/diocese and no income is effectively accrued to them. No income tax has been applicable to their salaries since 1944.
Father L Sahyaraj, deputy secretary of the Tamil Nadu Bishop’s Council told ucanews.com that the order has the potential to affect over 5000 priests and nuns who work in more than 2,800 church managed, but state-aided educational institutions in TN.
But the TN IT Department then challenged the order before a Division Bench of the Madras HC. On March 20, the Madras HC had held that Canon Law, that governs the working of various institutions run by the Catholic Church, does not bind Income Tax Act. Therefore, salaries earned by nuns and priests in schools run by Christian missionaries should be subject to Tax Deduction at Source (TDS). The division bench of the Madras HC comprising Justices Dr. Vineet Kothari and CV Karthikeyan held that the salaries were received by them in their individual capacity, therefore subsequent surrender of the salary to the religious institutions can only be treated as application of income.
But the petitioners, Institute of Franciscan Missionaries of Mary, moved SC against the judgment claiming it interfered with the vow of poverty and therefore was an infringement of their right to religious freedom under Article 25 of the Constitution.
Now, the SC has stayed the Madras HC judgement and ordered to maintain “status quo as on today”. The center has asked for four weeks to respond. The case has been adjourned to August 7.