Court’s decision
The Kerala High Court allowed the batch of writ petitions filed by various temples and Devaswom administrations and set aside coercive income tax recovery proceedings, including attachment of bank accounts. The Court held that income tax authorities cannot mechanically initiate recovery actions against temple institutions without adhering to statutory safeguards, especially when the institutions are governed by Devaswom Boards and subject to special control under state law.
The Court observed that several recovery steps were initiated without proper adjudication of exemption claims, without considering the statutory role of the Devaswom Board, and without granting meaningful opportunity of hearing. Such actions were held to be arbitrary, violative of natural justice, and contrary to the scheme of the Income Tax Act.
Accordingly, the Court quashed the impugned recovery and attachment orders and directed the income tax authorities to reconsider the matters afresh, strictly in accordance with law, after affording reasonable opportunity to the petitioners and taking into account the special statutory status of temple institutions.
Facts
The writ petitions were filed by various temples and Devaswom administrations governed by the Malabar Devaswom Board. These institutions are public religious entities whose administration, finances, and management are regulated by statute and overseen by the Devaswom authorities.
Income tax proceedings were initiated against these temples for different assessment years, resulting in demands being raised. Without final adjudication of exemption claims or resolution of pending proceedings, income tax authorities proceeded to attach temple bank accounts and initiate recovery actions, severely affecting daily religious activities and temple administration.
The petitioners contended that such coercive steps were taken without due notice, without considering their statutory character as Devaswom-controlled institutions, and without complying with procedural safeguards under the Income Tax Act. In these circumstances, the writ petitions were filed seeking judicial intervention.
Issues
Whether income tax authorities can initiate coercive recovery proceedings against temples without final adjudication of exemption claims.
Whether attachment of bank accounts of Devaswom-controlled temples violates statutory protections and principles of natural justice.
Whether income tax proceedings must account for the special legal status of temples administered by Devaswom Boards.
Whether recovery proceedings initiated without proper hearing and reasoned orders are legally sustainable.
Petitioner’s Arguments
The petitioners contended that temples governed by Devaswom Boards occupy a special statutory position and cannot be treated as ordinary assessees for recovery purposes. It was argued that temple funds are held in trust for religious and charitable purposes and indiscriminate attachment of bank accounts disrupts essential religious functions.
It was further submitted that exemption claims under the Income Tax Act were pending consideration and that coercive recovery before adjudication was impermissible. The petitioners argued that income tax authorities failed to issue proper notices, failed to consider replies, and bypassed mandatory procedural requirements.
The petitioners also contended that the Devaswom Board, being the statutory custodian, was not adequately involved or heard before recovery actions were initiated, rendering the proceedings arbitrary.
Respondent’s Arguments
The Revenue contended that the temples were assessees under the Income Tax Act and were liable to comply with tax demands raised against them. It was argued that non-payment of tax justified initiation of recovery proceedings, including attachment of bank accounts.
The Department submitted that sufficient notices had been issued and that failure to pay tax dues entitled the authorities to proceed under the recovery provisions of the Act. It was contended that the religious character of the institutions did not grant immunity from taxation or recovery.
The Revenue sought to justify the recovery actions as lawful and in accordance with statutory powers conferred under the Income Tax Act.
Analysis of the law
The High Court analysed the recovery provisions of the Income Tax Act in conjunction with the statutory framework governing Devaswom institutions. It held that while temples are not immune from taxation, income tax authorities must act with heightened procedural care given the public and religious nature of such institutions.
The Court emphasised that recovery proceedings cannot be initiated mechanically and must follow adjudication of exemption claims and statutory appeals. It reiterated that attachment of bank accounts is a drastic measure and must be resorted to only after compliance with principles of natural justice.
The Court further held that statutory bodies such as Devaswom Boards cannot be bypassed in proceedings affecting temple finances, as they are integral to lawful administration of temple properties and funds.
Precedent Analysis
The Court relied on earlier decisions recognising the special legal status of temples and religious institutions under state law. Precedents emphasising restraint in coercive recovery against public and charitable institutions were applied.
Judgments holding that recovery proceedings without proper hearing and reasoned orders are unsustainable were relied upon. The Court also drew guidance from constitutional principles protecting religious institutions from arbitrary state action.
These precedents collectively supported judicial intervention in the present batch of cases.
Court’s Reasoning
The Court found that the income tax authorities had proceeded in a mechanical manner without considering pending proceedings, exemption claims, or the statutory framework governing temple administration. It held that such an approach resulted in grave prejudice to temple functioning and public interest.
The Court rejected the argument that recovery powers are unfettered, holding that statutory discretion must be exercised reasonably and proportionately. Attachment of temple bank accounts without due process was held to be arbitrary.
Accordingly, the Court held that interference was necessary to restore legality and fairness in the exercise of recovery powers.
Conclusion
The High Court quashed the impugned recovery and attachment orders and directed the income tax authorities to reconsider the matters afresh. Authorities were directed to adjudicate exemption claims, issue proper notices, hear the petitioners and the Devaswom Board, and pass reasoned orders before initiating any recovery.
Implications
This judgment provides significant protection to temples and religious institutions from arbitrary tax recovery. It reinforces that statutory and constitutional safeguards must be respected while exercising coercive fiscal powers.
The ruling ensures continuity of religious and charitable activities and prevents disruption of temple administration through premature recovery actions.
