By P. SESH KUMAR
The dispute over judges’ official residence, conveyance, sumptuary allowance and leave travel concession exposes a larger conflict between tax law, judicial independence and equality before law.
New Delhi, August 14, 2026 — In two interim orders passed on 22 July and 10 August 2026, a Division Bench of the Delhi High Court has told the Income Tax Department to freeze the processing of income tax returns filed by sitting judges of the Supreme Court and of every High Court, and has asked judges’ private secretaries to hand over their PAN details so that the Centralised Processing Centre can be made to look away.
The occasion is a writ by the Delhi Tax Bar Association against a CBDT Office Memorandum of 12 September 2025, which holds that the tax-free character of a judge’s rent-free residence, conveyance facility, sumptuary allowance and leave travel concession survives only in the old tax regime.
There is an old discomfort, older than the Republic, in the spectacle of judges deciding what the State may take from judges. India has largely managed it by keeping the question academic. Since 1986, when Articles 125 and 221 were amended to place judicial salaries within Parliament’s taxing competence, the Supreme Court has been briskly unromantic about it.
In Justice Deoki Nandan Agarwala, a sitting Allahabad judge who had filed his return on the footing that his salary was not taxable at all was told, in effect, that a constitutional functionary is still a citizen with a Form 16 problem: what judges receive are salaries, and salaries are income, taxable by Act of Parliament in exactly the same manner as the income of anybody else. That settled the big question. What has now surfaced is the small one — and small questions, in tax, are where the constitutional mischief hides.
The quarrel, stripped of its wig
Section 22D of the High Court Judges (Salaries and Conditions of Service) Act, 1954, and its twin, Section 23D of the Supreme Court Judges Act, 1958, say something unusual. Beginning with the words “notwithstanding anything contained in the Income-tax Act, 1961,” they provide that the value of a judge’s rent-free official residence (or the allowance in lieu), the value of conveyance facilities, the sumptuary allowance and the value of leave travel concession for the judge and family “shall not be included in the computation of his income chargeable under the head ‘Salaries’.” Not deducted. Not exempted. Not included.
On 12 September 2025 the Central Board of Direct Taxes issued an Office Memorandum taking the view that this treatment continues only for judges who remain in the old regime, and that a judge who files under Section 115BAC(1A) of the Income-tax Act, 1961 — now Section 202 of the Income-tax Act, 2025 — forfeits it. The Delhi Tax Bar Association moved the High Court in W.P.(C) 9365/2026, contending, through Senior Advocate Sachit Jolly, that the Board had confused an exclusion with an exemption; that an exemption operates on an amount that has already entered the computation, whereas Sections 22D and 23D stop the amount at the gate; and that the memorandum, by shrinking a statutory entitlement, offends Articles 125 and 221, which forbid any variation of a judge’s allowances to his disadvantage after appointment.
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The Bench of Justices Dinesh Mehta and Rajneesh Kumar Gupta recorded a prima facie view squarely for the petitioner: the non-obstante clause in Sections 22D and 23D appears to override every provision of the Income-tax Act, Section 115BAC included, and sums kept outside the computation of salary cannot be equated with deductions or exemptions that the new regime disallows. It then did two remarkable things. It permitted every Supreme Court and High Court judge to file, or revise, a return disclosing these amounts in the “Exempt Income” schedule of the portal under the category “receipts not in the nature of income,” and it directed that such returns “shall not be processed and proceeded with, until further orders.”
When departmental counsel pointed out on 10 August that processing is automated, that the software cannot tell a judge’s return from a shopkeeper’s, and that some ninety-eight per cent of returns would be through the machine by the end of August, the Court asked the judges’ private secretaries to supply the PANs so that the relevant files could be held back. The matter is listed for 3 September 2026.
The clause nobody quoted
Here is where the reporting, and much of the commentary, has been thin. The debate has been conducted as though the new regime simply forgot about Sections 22D and 23D — as though Parliament, drawing up its list of casualties from within the four corners of the Income-tax Act, never turned its mind to carve-outs sitting in other statutes, and the CBDT then read that silence as abolition. That would indeed be a case of defective legislation, and the petitioners would win at a canter.
But the silence is not there. Sub-section (2) of Section 115BAC contains, after the long enumeration of disallowed reliefs, a clause providing that total income shall be computed “without any exemption or deduction for allowances or perquisite, by whatever name called, provided under any other law for the time being in force.” The Income-tax Act, 2025 re-enacts it in Section 202 in almost the same words. That clause has one obvious target, and Sections 22D and 23D are it. Whatever else may be said of the new regime, on this point Parliament was not asleep.
So the case turns on a narrow and rather beautiful question of characterisation. Is what Section 22D confers an “exemption or deduction for allowances or perquisite” — in which case the new regime kills it expressly — or is it a rule of computation that operates before exemption or deduction is even in issue? The petitioners say the latter, and the text of the operative part supports them: the words are “shall not be included in the computation.” Against that stands the marginal note of the very same section, which reads “Exemption from liability to pay income-tax on certain perquisites received by a Judge.”
The section describes itself, in its own heading, as an exemption in respect of perquisites. A draftsman looking for the phrase that Section 115BAC(2) was designed to catch could hardly have done better.
There is also a collision of non-obstante clauses, and collisions of that kind are not resolved by counting decibels. Section 22D overrides “the Income-tax Act, 1961”; Section 115BAC(2) overrides allowances conferred by “any other law for the time being in force.” One is special as to persons, the other special as to subject matter.
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The later expression of legislative will is the tax provision, and it was enacted with the earlier one in plain view. Set against that, the petitioners can reply — with force — that a provision inserted to prevent taxpayers from importing reliefs into a concessional regime should not be read as silently amending the service conditions of constitutional functionaries, and that if Parliament had meant to touch Articles 125 and 221 territory it would have said so in terms.
There is a further wrinkle that nobody appears to have raised, and it deserves to be flagged as speculative rather than settled. From 1 April 2026 the Income-tax Act, 1961 stands repealed. Section 22D’s non-obstante clause, and its reference to “section 15 of the Income-tax Act, 1961,” now point at a dead statute. Section 8 of the General Clauses Act ordinarily rescues such references by reading them as references to the re-enacted provision — but only “unless a different intention appears,” and a different intention is exactly what Section 202 might be said to disclose.
That the Ministry of Law allowed a 536-section “simplification” statute to go through without harmonising the two Judges Acts is the clearest evidence in the whole affair of the real defect here: not malice, but housekeeping.
Parity, and the two directions it cuts
Can a tax regime discriminate among taxpayers? Of course it can, and does, and courts allow it a latitude they allow almost no other class of legislation, provided the classification is intelligible and rationally connected to its object. But that is not this case, because the new regime does not classify judges at all. It is facially neutral. Members of Parliament and of State legislatures lose the exemption for their constituency and daily allowances under Section 10(17); the salaried lose house rent allowance, leave travel concession, entertainment allowance and even the deduction for professional tax; the middle class loses Section 80C, Section 80D and the interest on a self-occupied home.
Everyone hands in their carve-outs at the door and takes lower rates in exchange. The Revenue’s position, put bluntly in the hearings, is that allowing judges to keep the carve-outs and the concessional rates would produce an artificially low taxable income — a private regime of one. On the principle of parity, that is a strong answer.
The counter is stronger than it first appears. The reliefs that the new regime sweeps away are, almost without exception, instruments of personal saving or personal consumption: an insurance premium, a mutual fund, a home loan, a family holiday. A judge’s official bungalow is not a tax shelter; it is a security and protocol arrangement he does not choose and cannot decline. The sumptuary allowance is not pocket money; it defrays the cost of an office. Conveyance is a duty facility. And the new regime itself concedes the distinction elsewhere: allowances under Section 10(14) that meet expenditure actually incurred in the performance of official duty survive into the new regime.
The CBDT’s construction therefore produces a small absurdity — a section officer’s conveyance reimbursement remains outside his income, while the Chief Justice of India’s does not. Parity, properly understood, is not the levelling of unlike things. It is the insistence that expense reimbursement be taxed as expense reimbursement, whoever receives it.
Where the parity argument decisively fails the petitioners is on Articles 125 and 221. The protection there is against variation of a judge’s salary, allowances and rights “to his disadvantage after his appointment.” A generally applicable, non-discriminatory tax that happens to reach a judge is not a variation of his allowances; it is the ordinary incidence of citizenship, and Deoki Nandan Agarwala says so.
The American journey to the same destination is instructive: Evans v. Gore (1920) once held that taxing a sitting judge’s salary violated the Compensation Clause; O’Malley v. Woodrough (1939) began the retreat; and United States v. Hatter (2001) settled it — a generally applicable, non-discriminatory tax may be applied to judges, and only a levy that singles them out offends the guarantee. Section 115BAC(2) singles out nobody. It speaks of allowances “under any other law,” and judges are simply among those who have one.
Optional, and — contrary to almost everything you have read — reversible
The most consequential misconception in this entire debate is the belief that the new regime is a one-way door. It is not, and the distinction matters enormously to the constitutional argument.
Since Assessment Year 2024-25 the new regime has been the default, not the option; it applies unless you step out of it. For an individual with no income from business or profession, the step out is taken afresh every single year, simply by choosing the old regime in the return filed within the due date. No form, no election, no lock-in.
It is only assessees with business or professional income who must file Form 10-IEA and who, having once withdrawn and returned, are barred from switching again. Under the Income-tax Act, 2025 the architecture is preserved: the option under Section 202(4) is exercised in the return itself, Rule 136 of the Income-tax Rules, 2026 dispensing with a separate form for the non-business taxpayer.
Judges have no business income. They are constitutionally barred from practice. They are therefore in the freest category of taxpayer there is: annually, reversibly, costlessly free to choose. Which means that no judge has been deprived of anything. A judge who calculates that the perquisite value of a Lutyens bungalow, plus sumptuary, plus conveyance, plus leave travel, taxed at thirty per cent with surcharge and cess, exceeds the two or three lakh a year that the wider slabs of the new regime are worth to him at that income level — and for a sitting judge in Delhi the arithmetic is not close — has a remedy that requires no writ petition. He ticks a different box next July.
The petitioners’ honest reply is that a constitutional protection cannot be made to depend on an annual election, and that the old regime is now a shrinking rump into which the inattentive taxpayer is unlikely to find his way. Both propositions have some merit as policy. Neither establishes a vested right. And the practical consequence is that the drama of the case vastly exceeds its stakes: the sum in dispute is, for each judge, the difference between two computations he is free to choose between, and the reason it has reached a Division Bench is that it is about status, not money.
Is the new regime better? Mostly, and least of all for judges
The wider claim that the new regime is a good bargain — simpler and, for most people, cheaper — is broadly true and should not be surrendered to this controversy. A resident individual with total income up to twelve lakh rupees pays nothing, the rebate under Section 87A of the 1961 Act, now Section 156 of the 2025 Act, wiping out the liability; the seventy-five thousand rupee standard deduction pushes the zero-tax threshold for a salaried person to twelve lakh seventy-five thousand; the slab structure is wide and the compliance burden is a fraction of what it was. For the overwhelming majority of Indian taxpayers this is both a simplification and a saving, and the migration statistics reflect it.
But the benefit is steeply regressive in the technical sense: it is largest at the bottom and vanishes at the top. Above roughly twenty-four lakh rupees, both regimes charge thirty per cent, and the new regime’s entire advantage collapses into the value of the intermediate slabs — a fixed rupee amount, unchanging however high the income climbs — set against the loss of every deduction. At judicial salary levels the rebate is meaningless, the slab gain is a rounding error, and the perquisite value of an official residence in central Delhi can by itself outweigh it. The new regime was designed for the salaried taxpayer whose reliefs were modest. It was never going to suit the taxpayer whose reliefs are constitutional.
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The part that should make us uncomfortable
Set the tax law aside for a moment and look at the remedy. A court has directed the Executive not to process the tax returns of a class of assessees defined by the office they hold — an office held by the members of the Bench passing the order and by every one of their brother and sister judges across the country, including those on the Supreme Court, who are not before it. It has invited those assessees to route their disclosures through a portal field of the Court’s own devising. And because the Centralised Processing Centre cannot identify a judge from a return, it has asked the judges’ private secretaries to submit a list of PANs, so that the machine may be told whom to spare.
The doctrine of necessity supplies a complete answer to the objection that judges cannot hear a case about judges — there is nobody else to hear it, and two Delhi judges disclosed their own filing positions before the hearing, which is the right instinct. It supplies no answer at all to the question of the scope of interim relief.
Any taxpayers’ association could have come to the same Bench with the same grievance on behalf of ten thousand assessees and asked for the same order — a blanket direction to hold back processing pending a legal question — and would have been told, correctly, that intimation under Section 143(1) is not an assessment, that a refund or a demand can be undone, and that the writ jurisdiction is not an insurance policy against automated arithmetic. The reason the order is troubling is not that it is wrong in law. It is that it is unavailable to everyone else.
There is also the spillover nobody has costed. If the Court accepts that a non-obstante clause in a non-tax statute survives Section 115BAC(2), the clause disallowing reliefs “under any other law” becomes very nearly a dead letter, and every extra-statutory exclusion in the Indian code — the most cited being the exemption of United Nations salaries under the 1947 privileges legislation — comes back into play in the new regime. Courts are properly reluctant to construe a provision into nullity. That reluctance, rather than any argument the Revenue has so far made, may be what decides this case.
What ought to happen
Almost everything wrong here was avoidable, and none of it needed a court. A question of this weight should not have been answered by an Office Memorandum, which is an internal executive instrument that binds nobody, creates no liability and is the least appropriate vehicle imaginable for adjudicating the interaction of a tax statute with the service conditions of constitutional functionaries. Nor should the Board have taken until September 2025 to say anything at all about a regime that became the default in Assessment Year 2024-25 — five filing seasons of silence, during which judges filed on their own understanding and the department processed without demur.
Three clean routes remain. Parliament can amend Section 202 to carve out statutory allowances that defray the cost of a public office, which is the intellectually honest fix and would also cure the anomaly of the surviving Section 10(14) reimbursements. Or it can amend Sections 22D and 23D to state expressly that the exclusion operates whichever regime the judge is in, which is the quickest fix and costs the exchequer very little.
Or it can accept the Board’s reading and say so in the statute, leaving judges to exercise the annual option that every other salaried Indian exercises. Any of the three is better than the present arrangement, in which liability is fixed by memorandum, relief is granted by interim order, a repealed Act is still being cross-referenced by a live one, and the only Indians whose returns the Centralised Processing Centre has been instructed to leave alone are the ones who will eventually decide whether the instruction was lawful.
(This is an opinion piece. Views expressed are the author’s own.)
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