The Delhi High Court has instructed the income tax department not to process tax returns of high court and Supreme Court judges due to a dispute over allowances. According to Trak.in reports, a bench comprising justices Dinesh Mehta and Rajneesh Kumar Gupta directed the private secretaries of the judges to share their details with the tax authorities, including their PAN number. This directive applies specifically to those who have filed their ITR under the new income tax regime. The court's directions were issued in orders passed on July 22 and August 10, with the latest order explicitly stating that 'the returns filed by respected judges of the high court and Supreme Court will not be processed and moved until the further order.'
The dispute centers on judicial allowances that are excluded from income computation under Section 22D of the High Court Judges Act, 1954 and Section 23D of Supreme Court Judges Act (Salaries and Conditions of Service) 1958. As reported by Trak.in, the Delhi Tax Bar Association has challenged the Central Board of Direct Taxes (CBDT) position that these exemptions cannot be claimed under the new tax regime. The CBDT had stated in September 2025 that the new tax regime does not provide for deductions and exemptions of the kind available under the old system. The dispute concerns allowances and benefits including rent-free official accommodation, conveyance allowance, sumptuary allowance and leave travel concession. The case highlights a broader tension in Indian tax law, as the new regime strips away most allowance exemptions that existed under the old system.
The petitioner has argued that the CBDT's September 2025 memorandum is contrary to law and amounts to interference with judicial independence. According to Trak.in reports, the petitioner asserted that the memorandum deprives judges of vested rights and violates Articles 125 and 221 of the Constitution, which guarantee that allowances and salaries of judges from SC and HC shall not be curtailed or varied to their detriment from the date of their appointment. The court's July 22 order stated that prima facie, sections 22D and 23D override all provisions of the Income-Tax Act, with the petitioner contending that 'the memorandum takes away the judges' vested rights and violates Articles 125 and 221 of the Constitution'.
During the August 10 hearing, the income tax counsel informed the court that income tax returns are now processed electronically and the system cannot automatically identify whether the ITR belongs to a sitting judge. As reported by Trak.in, the counsel added that there is every likelihood that by the end of August, about 98% of the returns would be processed without human intervention. The court clarified that judges can file their income tax returns or submit revised returns by showing the specified judicial allowance amount under the category 'receipts not in the nature of income.' The court directed that judges who have opted for the new tax regime can declare the disputed allowance amounts separately, while any tax demand or refund will remain in abeyance until the case is resolved.
The court directed that any demands raised after processing of returns would be kept in abeyance during the pendency of the petition. According to Trak.in reports, if any amount is found to be refundable, it shall not be refunded, and any amount already refunded to the judges shall be subject to the outcome of the case. The petitioner has contended that the CBDT's September 2025 memorandum is contrary to law, and 'nothing short of interference in the independence of judiciary.' The dispute therefore remains unresolved, with the court yet to give a final ruling on whether the allowances can be treated as exempt under the new tax regime. The case reveals important implications for taxpayers, as it demonstrates how allowances are treated differently between the old and new tax regimes, with court-protected perks receiving preferential treatment while salary allowances face full taxation.
