INCOME TAX : Tax is liable to be deducted at source under section 192 from salary paid to teachers, who are nuns or priests of religious congregation
Section 192 does not contemplate any exemption from the liability to deduct tax at source on the basis of the nature of calling, profession, or vocation of the person who receives the salary and section 192 obliges every person who makes a payment under head 'Salaries' to deduct tax at source at rates prescribed without fail.
As regards petitioner's submission that as per the canon law, once a perpetual vow of poverty is taken, the nun or priest, as the case may be, undergoes a civil death, and thereafter, they are not 'persons' under the Act, the High Court held that if in spite of the vow of poverty undertaken by the nuns or priests, they work for gain and receive salary, irrespective of whether the ultimate beneficiary is somebody else or not, the salary partakes of the character of income received by the nuns and priests from Government. 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.
From a reading of the Circular of 1977 that, though the caption mentions the subject as 'Fees of members of religious congregation' the recital portion of the circular refers only to the fees received by the missionaries in contradistinction to salary received by the nuns or priests and the Circular of 1977 cannot apply to the salaries received by nuns or priests from the Government or aided institutions.
A reading of section 119 will make it explicit that the power to issue circular, or instruction by the CBDT is only for the 'proper administration' of the Act. In the process of proper administration of the Act, the CBDT does not have the power to issue any circular excluding or exempting a person or a category of persons from the taxing provisions. The power to exclude any person or category of persons from the purview of tax can be done only through the mandate of the statute. The statute has not recognized any exclusion of tax on the income of nuns or priests. In such a perspective, the CBDT could not have issued any circular in exercise of the powers under section 119 to confer an exemption to the salaries received by the nuns or priests from the rigour of income-tax. The 1944 Circular or even the 1977 circular cannot be construed as excluding tax deducted at source from the salaries received by the nuns or priests from their respective establishments.