In a significant development, the Supreme Court has agreed to scrutinize the eligibility of income tax exemption for nuns and priests serving as educators in government-aided Christian missionary schools. This decision comes in response to the urgent plea of numerous dioceses and congregations from Tamil Nadu and Kerala, seeking clarity on the matter.
A bench comprising Chief Justice D Y Chandrachud and Justices JB Pardiwala and Manoj Misra took cognizance of the matter on January 18, as presented by senior advocate Arvind Datar. The central focus of the plea revolves around the question of whether the income derived by nuns and priests in their capacities as teachers should be subject to income tax.
The Income Tax department had issued a directive in 2014, instructing educational authorities to implement Tax Deducted at Source (TDS) for individuals engaged as teachers. Dissatisfied with the decision, nearly 100 dioceses and congregations from Tamil Nadu and Kerala took the matter to the high courts, leading to subsequent appeals in the Supreme Court.
The appellants argue that the income earned by nuns and priests working as teachers ultimately belongs to the congregation operating the school. They contend that as individuals, they do not personally acquire the money disbursed as salaries.
This legal challenge underscores the ongoing debate regarding whether the income earned by these religious figures should be eligible for income tax or whether it falls under the umbrella of exemptions historically granted to government-aided missionary schools.
It is worth noting that government-aided missionary schools enjoyed income tax exemption since 1944 until 2014 when the union government decided to impose tax deduction at source, prompting the legal dispute that has now reached the highest judicial echelons of the country. The Supreme Court’s forthcoming deliberations on this matter will likely have far-reaching implications for the taxation framework surrounding religious institutions engaged in educational activities.
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