The Delhi High Court has prima facie held that statutory allowances granted to High Court and Supreme Court judges may continue to remain outside the ambit of taxable salary even under the new income tax regime, while staying further processing of the judges’ income tax returns until the issue is finally decided.
The bench of Justice Dinesh Mehta and Justice Rajneesh Kumar Gupta also expressed a preliminary view that the Central Board of Direct Taxes’ (CBDT) Office Memorandum dated September 12, 2025, may be inconsistent with the statutory protection granted under the High Court Judges (Salaries and Conditions of Service) Act, 1954 and the Supreme Court Judges (Salaries and Conditions of Service) Act, 1958.
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Background of the Dispute
The writ petition was filed by the Delhi Tax Bar Association challenging a CBDT Office Memorandum that clarified the tax treatment of allowances payable to High Court judges under Section 22D of the High Court Judges (Salaries and Conditions of Service) Act, 1954 in light of Section 115BAC of the Income-tax Act, 1961 (corresponding to Section 202 of the Income-tax Act, 2025). According to the Association, the clarification effectively denies judges the benefit of excluding specified allowances from taxable income if they opt for the new tax regime.
Senior Advocate Sachit Jolly, appearing for the petitioner, submitted that members of the Delhi Tax Bar Association regularly advise High Court and Supreme Court judges on taxation matters and were therefore directly concerned with the legality of the CBDT’s clarification and its implications for judicial independence.
Court Makes Disclosure Before Hearing the Matter
Before hearing the case, the Bench comprising Justice Dinesh Mehta and Justice Rajneesh Kumar Gupta made an unusual disclosure regarding their own tax positions to avoid any perception of personal interest. Justice Rajneesh Kumar Gupta informed that he had already filed his income tax return under the new regime without claiming the disputed allowances, while Justice Dinesh Mehta stated that he intended to file his return under the old regime so that the outcome of the case would not personally affect his decision.
Petitioner Challenges CBDT’s Interpretation
The petitioner argued that Sections 22D of the 1954 Act and 23D of the 1958 Act contain a non-obstante clause providing that certain judicial allowances—including rent-free official residence, conveyance facilities, sumptuary allowance, and leave travel concession—shall not be included while computing income chargeable under the head “Salaries.”
According to the petitioner, these statutory provisions do not grant a tax “deduction” or “exemption.” Instead, they place the specified allowances completely outside the computation mechanism of taxable salary itself. Therefore, the restrictions on exemptions and deductions under the new tax regime contained in Section 115BAC cannot override these special statutory protections.
The Association further contended that the CBDT Office Memorandum wrongly treated these statutory exclusions as exemptions that become unavailable under the concessional tax regime. It also argued that the clarification violated Articles 125 and 221 of the Constitution, which prohibit variation of judges’ salaries and allowances to their disadvantage after appointment.
Practical Difficulty in Filing Returns
Another grievance raised before the Court was that the income tax return utility under the new regime did not provide any specific field enabling judges to claim the statutory exclusion. The petitioner therefore requested interim directions permitting judges to disclose the disputed allowances under the category “Receipts not in the nature of income” available in the “Exempt Income” section of the e-filing portal.
Delhi High Court’s Prima Facie Findings
After considering the submissions, the High Court observed that Section 22D contains a non-obstante clause overriding the provisions of the Income-tax Act, including Section 115BAC.
The Court made an important prima facie observation that the statutory language does not merely exempt the allowances from tax; rather, it excludes them altogether from the computation of income under the head “Salaries.” Consequently, an amount that is never included in taxable income cannot be treated as an exemption or deduction that is prohibited under the new tax regime.
The Bench observed:
“An amount which is not even included in the income cannot be said to have been exempted or deducted.”
The Court held that the issue requires detailed consideration.
Interim Relief Granted
Pending final adjudication, the High Court directed that judges of the Supreme Court and High Courts may file or revise their income tax returns under the new regime by reporting the disputed allowances under the category “Receipts not in the nature of income” within the “Exempt Income” section of the e-filing portal.
The Court further ordered that such returns shall not be processed until further orders, thereby protecting the concerned judges from any adverse consequences while the legality of the CBDT’s Office Memorandum is examined.
The matter has been directed to be listed for further hearing on September 3, 2026.
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