Delhi High Court to Rule on Taxation of Judges’ Allowances
The Delhi High Court is poised to deliberate on the contentious issue of whether allowances granted to judges of the Supreme Court and High Court can be subjected to taxation under the newly instituted income-tax regime. This legal challenge has been initiated by the Delhi Tax Bar Association (DTBA) against a directive issued on September 12, 2025, by the Central Board of Direct Taxes (CBDT). The directive asserts that tax benefits for judges will persist only under the old tax regime.
The matter was presented before Justices Dinesh Mehta and Rajneesh Kumar Gupta. However, proceedings were temporarily halted following an intervention by N Hariharan, President of the Delhi High Court Bar Association (DHCBA). Hariharan requested the petitioner’s counsel to postpone arguments due to an ongoing lawyers’ strike.
The legal debate centers around Section 22D of the High Court Judges Act, 1954, and Section 23D of the Supreme Court Judges Act, 1958. These statutes stipulate that rent-free accommodations, conveyance facilities, sumptuary allowances, and leave travel concessions provided to judges should not be included in their taxable income under the category of “salaries.” The controversy arose when a High Court judge highlighted an issue to the CBDT on August 12, 2025, stating that the current systems for tax deduction, including Form 16 and online returns, do not accommodate these statutory exclusions under the new tax regime.
The CBDT maintained that benefits under Section 22D remain applicable only within the old regime, arguing that allowing further exemptions under the new regime would provide judges with a “double benefit” due to lower rates and higher rebates. In contrast, the DTBA contends that the CBDT has misconstrued a statutory exclusion as an income-tax exemption, emphasizing that allowances under Sections 22D and 23D never enter the taxable salary computation.
Additionally, the DTBA argues that the memorandum contravenes Articles 125 and 221 of the Constitution, which prevent any adverse changes to judges’ allowances post-appointment. Consequently, the association seeks to nullify the memorandum and requests modifications to forms such as 24Q, Form 16, ITR-1, and ITR-4 to enable judges to accurately report these exclusions. An interim application has also been filed to extend the July 31 deadline for filing returns for the 2026-27 assessment year.
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During the hearing, Senior Advocate Sachit Jolly, representing the DTBA, proposed an interim solution. He suggested that judges could report these amounts as “receipts not in the nature of income” while submitting returns, with a request for the Income Tax Department to refrain from processing these until the court resolves the petition.
In response to Hariharan’s plea to respect the Bar’s collective decision to strike, Jolly clarified his pro bono representation in the matter, underscoring the urgency due to potential impacts on judges’ salaries. Despite acknowledging the importance of the issue, Jolly agreed not to press for the hearing that day, and the Court rescheduled the case for July 16, without issuing any interim orders.
Legal representation for Jolly was provided by Advocate Sohum Dua.
