Statutory allowances for Judges are excluded from salary income, superseding the new tax regime's deduction restrictions.

In brief

The question

1. Whether the allowances granted to High Court and Supreme Court Judges under Section 22D and Section 23D of their respective Service Conditions Acts are hit by the "no-exemption" clause of the New Tax Regime (Section 115BAC)

The court held

The Court issued an interim order permitting all Judges of the Supreme Court and High Courts to file their returns under the New Regime by reflecting these allowances under the sub-category "Receipts not in the nature of income" within the "Exempt Income" dashboard

It also directed

The Court further directed that returns so filed shall not be processed or proceeded with until further orders. The matter is listed for further consideration on 03.09.2026

01Facts

The Petitioner, Delhi Tax Bar Association, challenged an Office Memorandum (OM) dated 12.09.2025 issued by the CBDT

¶ 1

The OM clarified that under the "New Tax Regime" (Section 115BAC of the Income Tax Act, 1961 / Section 202 of the Income Tax Act, 2025), certain allowances payable to High Court and Supreme Court Judges—such as Rent-Free Official Residence, Conveyance Allowance, Sumptuary Allowance, and Leave Travel Concession—would no longer be exempt because the new regime does not allow for deductions or exemptions

¶ 1, 7

The Petitioner argued this violates the constitutional guarantee that judicial allowances shall not be varied to a Judge's detriment

¶ 6

02Issues

i.1. Whether the allowances granted to High Court and Supreme Court Judges under Section 22D and Section 23D of their respective Service Conditions Acts are hit by the "no-exemption" clause of the New Tax Regime (Section 115BAC)

¶ 8-9

ii.2. Whether the CBDT’s Office Memorandum dated 12.09.2025 is contrary to the statutory protection provided under the High Court Judges (Salaries and Conditions of Service) Act, 1954

¶ 9

03Law Applied

The Court primarily considered Section 22D of the High Court Judges (Salaries and Conditions of Service) Act, 1954 and Section 23D of the Supreme Court Judges (Salaries and Conditions of Service) Act, 1958, which state that notwithstanding anything in the Income Tax Act, specified perquisites "shall not be included in the computation" of income chargeable under the head "Salaries"

¶ 13-14

It further referenced Articles 125 and 221 of the Constitution of India, which protect the salaries and allowances of Judges from being varied to their disadvantage during their tenure

¶ 6

Provisions in the judgment · 8

High Court Judges (Salaries And Conditions Of Service) Act, 1954 Section 22ASection 22BSection 22CSection 22D

Supreme Court Judges (Salaries And Conditions Of Service) Act, 1958 Section 23D

Income Tax Act, 1961 Section 15Section 115

Income Tax Act, 2025 Section 202

04Reasoning

The Court observed that Section 22D and 23D contain a non-obstante clause, giving them overriding effect over all provisions of the Income-Tax Act, including the new regime under Section 115BAC

¶ 14

The court reasoned that these sections do not merely provide a "deduction" or "exemption" from taxable income; rather, they stipulate that these allowances are never to be "included" in the computation of salary income in the first place

¶ 8, 14

Therefore, an amount that is never part of the gross income cannot be "disallowed" as an exemption under the new tax regime. The Court found a prima facie case that the CBDT OM was contrary to law and potentially interfered with judicial independence

¶ 9, 14

05Holding

¶ 10, 16

The Court further directed that returns so filed shall not be processed or proceeded with until further orders. The matter is listed for further consideration on 03.09.2026

¶ 17, 18

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