Delhi High Court protects judges' allowances from new tax regime under Section 22D - 2026-07-22

Delhi High Court protects judges' allowances from new tax regime under Section 22D

In a significant interim ruling that reinforces the financial independence of the judiciary, the Delhi High Court has held that special allowances payable to judges of the Supreme Court and High Courts remain outside the tax net despite the introduction of the new income tax regime. The Court ruled that a CBDT Office Memorandum seeking to tax these allowances under Section 115BAC of the Income Tax Act, 1961 is prima facie contrary to law, and granted interim protection to all sitting judges.

A Challenge to the CBDT's Clarification

The Delhi Tax Bar Association , through its Secretary K G Bansal, approached the High Court challenging an Office Memorandum dated 12.09.2025 issued by the Central Board of Direct Taxes (CBDT) . The memorandum clarified how allowances payable to High Court judges under Section 22D of the High Court Judges (Salaries and Conditions of Service) Act, 1954 would be treated in the backdrop of the new tax regime introduced under Section 115BAC of the Income Tax Act, 1961 (corresponding to Section 202 of the Income Tax Act, 2025).

The CBDT had ruled that once a taxpayer opts for the new regime — which offers moderate tax rates but no deductions or exemptions — allowances such as Rent-Free Official Residence, Conveyance Allowance, Sumptuary Allowance, and Leave Travel Concession would no longer be exempted.

"Allowances Are Not 'Exempted' — They Are Outside the Tax Net"

Appearing for the petitioner, Senior Counsel Sachit Jolly argued that Section 22D of the 1954 Act and Section 23D of the Supreme Court Judges (Salaries and Conditions of Service) Act, 1958 use a unique and deliberate expression. They do not provide for any 'deduction' or 'exemption' — instead, they take the allowances entirely out of the purview of Section 15 of the Income Tax Act . An amount that is never included in income cannot be said to have been exempted or deducted, and therefore the new regime's restrictions on exemptions are inapplicable.

The petitioner further contended that the Office Memorandum was violative of Articles 125 and 221 of the Constitution , which guarantee that the salaries and allowances of judges shall not be curtailed or varied to their detriment after appointment, and described the move as "nothing short of interference in the independence of judiciary."

A Judiciary That Leads by Example

Before hearing the matter, the Bench — comprising Justice Dinesh Mehta and Justice Rajneesh Kumar Gupta — made a notable disclosure in the interests of judicial propriety. Justice Gupta had already filed his return under the new regime without claiming exemption of the contentious allowances, while Justice Mehta confirmed he would file under the old regime, ensuring the issue at hand would not personally influence their decision.

The Crucial Distinction: Inclusion vs. Exemption

In its prima facie analysis, the Court zeroed in on the operative language of Section 22D, which states that the specified allowances:

> "shall not be included in the computation of his income chargeable under the head 'Salaries' under section 15 of the Income-tax Act 1961."

The Court observed that the non-obstante clause in Section 22D and 23D gives these provisions overriding effect over all provisions of the Income Tax Act, including Section 115BAC. It reasoned:

> "An amount which is not even included in the income cannot be said to have been exempted or deducted so as to fall foul of Section 115BAC of the Act of 1961."

Interim Relief for All Sitting Judges

Finding that the matter requires consideration, the Court directed that all judges of the Supreme Court and High Courts may file their returns (or revised returns) reflecting the Section 22D and 23D allowances under the caption 'receipts not in the nature of income' — accessible via the 'Exempt Income' dashboard, 'other incomes' category. Crucially, the Court ordered that:

> "The returns so filed by Hon'ble Judges of the High Court and Supreme Court shall not be processed and proceeded with, until further orders."

The respondents — the Union of India — were granted two weeks to file their reply, with rejoinder due two weeks thereafter. The matter is next listed on 03.09.2026 , where the Court will examine the issue on merits and determine whether the CBDT's position can withstand the overriding statutory protection afforded to judicial allowances.