Delhi HC Allows SC, HC Judges To Show Allowances As 'Receipts Not In Nature Of Income' Under New Tax Regime

The Delhi High Court, by way of an interim direction, has allowed Supreme Court and High Court judges to file their income tax returns by showing prescribed judicial allowances as “receipts not in the nature of income”, even while opting for the new tax regime.

The order came in a petition filed by the Delhi Tax Bar Association challenging a September 12, 2025, Office Memorandum issued by the CBDT, which, according to the petitioner, denied judges opting for the new tax regime the benefit of specified judicial allowances

Under Sections 22D of the High Court Judges (Salaries and Conditions of Service) Act, 1954 and 23D of the Supreme Court Judges (Salaries and Conditions of Service) Act, 1958, allowances such as rent-free accommodation, conveyance facilities, sumptuary allowance and leave travel concession are kept outside the ambit of taxable salary.

A bench comprising Justices Dinesh Mehta and Rajneesh Kumar Gupta, while considering the challenge, observed prima facie that the protection afforded by Sections 22D and 23D may continue to operate notwithstanding the introduction of Section 115BAC.

The Bar Association contended that the CBDT memorandum undermines statutory safeguards available to judges and runs contrary to Articles 125 and 221 of the Constitution, which prohibit any reduction in their salaries and allowances to their disadvantage after appointment.

Senior Advocate Sachit Jolly argued that the provisions governing judicial allowances do not merely create exemptions or deductions but, the allowances are altogether excluded from the computation of income under the head “salary”, and therefore cannot be denied on the ground that the new tax regime dispenses with exemptions.

Counsel appearing for the Union government sought time to file a response, following which the Court granted two weeks.

Expressing its prima facie view, the bench observed that the non-obstante clauses contained in Sections 22D and 23D appear to override all provisions of the Income Tax Act, including Section 115BAC. The Court further noted that amounts excluded from the computation of salary income cannot be equated with deductions or exemptions barred under the new regime.

In the Court's words, “In prima facie opinion of this Court, the non-obstante clause in Section 22D and 23D gives Section 22D/23D overriding effect over all the provisions of the Income-Tax Act, 1961, including Section 115BAC. That apart, the expression used in Section 22D drives the allowances even outside the computation of income under the head salaries-'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.”

As such, pending further consideration, the Court directed that judges may file their income tax returns or revised returns by reflecting the allowances covered under Sections 22D and 23D in the category of “receipts not in the nature of income” under the “Exempt Income” tab of the e-filing portal.

The bench also ordered that such returns shall not be processed until further orders.

The case will next be taken up on September 3.

For Petitioner: Senior Advocate Sachit Jolly with Advocates Mansha Anand, Sohum Dua, Abyudaya Shankar Bajpai, Saloni Ray, Ghunaim Siddiqui, Manvi, and Ramanand Roy.

For Respondents: Senior Standing Counsel Shlok Chandra with Junior Standing Counsels Naincy Jain and Madhavi Shukla, and Advocate Udit Dad for Respondent No. 2; Central Government Standing Counsel Arti Bansal with Advocate Shruti Goel for Respondent No. 1.