Delhi High Court Stays CBDT’s Memo Denying Tax Relief; Asks SC, HC Judges To Show Allowances As "Receipts Not In The Nature Of Income"

The High Court was considering a writ petition filed by the petitioner-Delhi Tax Bar Association assailing the Office Memorandum, issued by the Central Board of Direct Taxes (CBDT) clarifying the stand on allowances payable to Judges of the High Courts under Section 22D of the High Court Judges (Salaries and Conditions of Service) Act, 1954 in the backdrop of the provisions of Section 115BAC of the Income Tax Act, 1961 (Section 202 of the Income Tax Act, 2025).

Holding that the issue demanded clarification, the Division Bench of Justice Dinesh Mehta and Justice Rajneesh Kumar Gupta held, “Meanwhile, all Hon’ble Judges of Supreme Court and High Court may file their return of income/Revised Return reflecting the amount allowance covered by 22D and 23D of the Act of 1954 and 1958 under the caption ‘receipts not in the nature of income’ by going to ‘Exempt Income’ part of the Dashboard and then opting category ‘other incomes’ and sub-category ‘receipts not in the nature of income’, while furnishing their return of income.”

Senior Advocate Sachit Jolly represented the Petitioner while Senior Standing Counsel Shlok Chandra represented the Respondent.

Factual Background

The impugned Office Memorandum was challenged on the ground that it takes away the vested right of the Judges of the High Court and, on similar analogy, the allowances payable to Judges of the Supreme Court are also likely to be taken away in the new regime under the Act of 1961/2025.

Arguments

It was the case of the petitioner that as per Section 22D of the High Court Judges Act, 1954 and 23D of Supreme Court Judges Act (Salaries and Conditions of Service) 1958, notwithstanding the provision of Income Tax Act, allowance payable under Section 22A, 22B and 22C and Leave Travel Concession provided to the Judges of High Court and Supreme Court are totally excluded from the computation of their income chargeable under the head salary under Section 15 of the 1961 Act. It was argued that regardless of the introduction of a new regime in the form of Section 115BAC in the Act of 1961 or 202 in the Act of 2025, these allowances should continue to be out of the tax net.

Reasoning

Section 22D in the High Court Judges (Salaries and Conditions of Service) Act, 1954 makes provision for exemption from liability to pay income-tax on certain perquisites received by a Judge. The Bench opined that 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”, it stated.

The Bench held that the matter required consideration and allowed the Judges of the Supreme Court and High Court to file their return of income/Revised Return reflecting the amount allowance covered by 22D and 23D of the Act of 1954 and 1958 under the caption ‘receipts not in the nature of income’ by going to ‘Exempt Income’ part of the Dashboard. “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”, it ordered.

The matter has now been listed on September 3, 2026.

Cause Title: Delhi Tax Bar Association v. Union Of India (Neutral Citation: 2026:DHC:5845-DB)

Appearance

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

Respondent: Senior Standing Counsel Shlok Chandra, Junior Standing Counsels Naincy Jain, Madhavi Shukla, Advocates Udit Dad, Central Govt Standing Counsel Arti Bansal, Advocate Shruti Goel

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