Delhi High Court judges disclose own tax regime choices before hearing plea on taxation of judges' allowances

Two Delhi High Court judges on Wednesday disclosed their own income-tax filing positions before hearing a challenge concerning the taxation of allowances paid to Supreme Court and High Court judges [Delhi Tax Bar Association v. Union of India and another].

A Division Bench of Justices Dinesh Mehta and Rajneesh Kumar Gupta said the disclosure was necessary since the outcome of the case could potentially affect them personally.

The case concerns whether judges opting for the new income-tax regime can continue to exclude specified allowances from their taxable salary.

The Court recorded that one of the judges had already filed his return without claiming the disputed benefit under the new regime.

Justice Mehta, who was yet to file his return, undertook to opt for the old tax regime while the petition remained pending. He said this would ensure that the outcome of the case did not immediately benefit him.

“As a judge, we should set an example,” Justice Mehta observed.

After making the disclosure, the Bench passed an interim order allowing Supreme Court and High Court judges opting for the new regime to report the disputed allowances as “receipts not in the nature of income."

The Income Tax Department was directed not to process or proceed with returns filed under this arrangement until the next date of hearing.

The direction came on a petition by the Delhi Tax Bar Association (DTBA) challenging a September 12, 2025, office memorandum issued by the Central Board of Direct Taxes (CBDT).

The memorandum states that the tax treatment available to judges for certain allowances would continue only under the old tax regime.

Senior Advocate Sachit Jolly, appearing for the DTBA, referred 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 are not treated as part of a judge's taxable salary. 

A corresponding provision is contained in Section 23D of the Supreme Court Judges Act, 1958.

These provisions covers rent-free official accommodation, conveyance facilities, sumptuary allowance and leave travel concession. They state that these benefits shall not be included while computing judges’ income chargeable under the head “salaries."

Jolly submitted that this provision does not provide an exemption or deduction. Rather, it takes the allowances outside the computation of salary income at the threshold.

He argued that the allowances would remain outside taxable income regardless of whether a judge opted for the old regime or the new regime under Section 115BAC of the Income Tax Act, 1961.

The CBDT had taken the position that allowing this benefit under the new regime, which offers lower rates while restricting exemptions and deductions, would confer a “double benefit” on judges.

The DTBA argued that the CBDT had wrongly characterised the statutory exclusion as an exemption. According to the association, an exemption operates after an amount enters the computation of income, whereas the allowances covered by the Judges Acts do not enter the computation at all.

Jolly also contended that the CBDT's memorandum interfered with judicial independence and violated Articles 125 and 221 of the Constitution, which protect judges’ allowances from being varied to their disadvantage after their appointment.

The Court noted that the income-tax return form did not have a specific field for judges choosing the new regime to report the statutory exclusions.

It consequently permitted them to disclose the allowances under “income from other sources” and the subcategory “receipts not in the nature of income." The returns would remain unprocessed pending further orders.

The Union government and the CBDT were granted four weeks to file their replies. The DTBA may file its rejoinder within two weeks thereafter.

Jolly was instructed by advocate Sohum Dua.