In a significant move, two judges from the Delhi High Court disclosed their personal income-tax positions on Wednesday, preceding their involvement in a pivotal case concerning the taxation of allowances for judges of the Supreme Court and High Courts. The case, titled Delhi Tax Bar Association v. Union of India and another, was heard by a Division Bench comprising Justices Dinesh Mehta and Rajneesh Kumar Gupta. The judges emphasized that their disclosure was essential due to the potential personal impact of the case’s outcome.
Judicial Disclosure and Interim Order
The core of the case examines whether judges who choose the new income-tax regime can continue to exclude specific allowances from their taxable income. Justice Mehta revealed that, although he had not yet filed his return, he would adhere to the old tax regime while the petition was active to avoid any immediate personal gain from the case’s decision. “As a judge, we should set an example,” commented Justice Mehta.
Following their disclosures, the Bench issued an interim order that permits Supreme Court and High Court judges who opt for the new tax regime to list the disputed allowances as “receipts not in the nature of income.” The Income Tax Department has been instructed not to process these returns until further notice.
Challenge to CBDT Memorandum
The petition, brought forth by the Delhi Tax Bar Association (DTBA), contests a memorandum issued by the Central Board of Direct Taxes (CBDT) on September 12, 2025. This memorandum stipulates that the tax treatment of certain allowances for judges would be maintained only under the old tax regime.
Senior Advocate Sachit Jolly, representing the DTBA, pointed to Section 22D of the High Court Judges Act, 1954, which ensures that official service-related benefits or allowances are exempt from income tax and not counted as part of a judge’s taxable salary. A similar provision exists in Section 23D of the Supreme Court Judges Act, 1958. These provisions cover benefits such as rent-free accommodation, conveyance facilities, sumptuary allowance, and leave travel concession, stating that they are not to be included in the calculation of a judge’s salary income.
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Legal Arguments and Constitutional Concerns
Jolly argued that these legislative provisions do not offer an exemption or deduction; instead, they exclude the allowances from salary computation at the outset. He insisted that these allowances remain non-taxable, irrespective of whether a judge opts for the old or new regime under Section 115BAC of the Income Tax Act, 1961.
The CBDT’s position, that allowing this benefit under the new regime would provide a “double benefit” due to lower rates and restricted exemptions, was challenged by the DTBA. The association accused the CBDT of misinterpreting the statutory exclusion as an exemption. According to Jolly, an exemption applies post-inclusion in income computation, whereas allowances under the Judges Acts are never part of this computation.
Furthermore, Jolly contended that the CBDT’s memorandum undermines judicial independence and contravenes Articles 125 and 221 of the Constitution, which safeguard judges’ allowances from detrimental variations post-appointment.
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Notably, the Court acknowledged the absence of a specific field in the income-tax return form for judges adopting the new regime to declare these statutory exclusions. Consequently, judges were permitted to report these allowances under “income from other sources” and “receipts not in the nature of income.” The returns will remain unprocessed pending further directives.
The Union government and CBDT have four weeks to submit their replies, while the DTBA has been granted two weeks to file a rejoinder. Senior Advocate Sachit Jolly was assisted by advocate Sohum Dua in this matter.
