Delhi High Court Halts Processing of Judges' Income Tax Returns Amid Allowance Dispute

The Delhi High Court has instructed the income tax department not to process the returns of judges of the High Court as well as the Supreme Court in connection with the ongoing dispute over the exemption of certain allowances under the new taxation system.

A division bench comprising Justices Dinesh Mehta and Rajneesh Kumar Gupta directed that the private secretaries of judges, who filed their income tax returns under the new taxation system, submit their details and the PAN number to authorities.

The directions were given in two separate orders passed on July 22 and August 10 on a petition filed by the Delhi Tax Bar Association.

The petition argues that certain allowances being paid to judges are completely exempted from the income calculation as per the provisions of Section 22D of the High Court Judges Act, 1954, and Section 23D of the Supreme Court Judges Act (Salaries and Conditions of Service) Act, 1958.

The petitioner has made a complaint against the Central Board of Direct Taxes (CBDT). On September 12, 2025, CBDT had announced that those allowances like rent-free official residence, conveyance allowance, sumptuary allowances, and leave travel concession, will not be exempted under the new regime since it provides for neither deductions nor exemptions.

In the court order on July 22, the court stated that prima facie, sections 22D and 23D override all the provisions under the Income-Tax Act and the matters raised in the petition deserved consideration.

In the order, the court clarified that the judges can file their return or revised return illustrating the amount of allowance under ‘receipts not in the nature of income’ and the order by using the words “the returns filed by respected judges of the high court and Supreme Court will not be processed and moved until the further order.”

The income tax counsel stated on August 10 that since the returns are processed electronically, the software itself cannot tell which returns belong to which sitting judge.

He mentioned that there are high chances of about 98 percent of returns being processed without human intervention by the end of August.

The court directed the private secretaries of the judges to provide the relevant details to the authorities. It further ordered that if any demand is raised after processing the returns, it shall remain in abeyance while the petition is pending.

The court also said that if any amount is found refundable, it shall not be released. Any amount already refunded to the judges will remain subject to the outcome of the case.

The petitioner has argued that the CBDT's Officer September 2025 Memorandum is contrary to law and is "nothing short of interference in the independence of judiciary".

It contended that the memorandum takes away the judges' vested rights and violates Articles 125 and 221 of the Constitution, which provide that the salaries and allowances of Supreme Court and high court judges cannot be reduced or altered to their detriment after their appointment.