The Delhi High Court’s interim order in Delhi Tax Bar Association v. Union of India raises two important issues. The first concerns the taxability of statutory allowances payable to High Court & Supreme Court Judges under the new tax regime. The second is the Court’s unusual disclosure of its own tax position before hearing the matter, highlighting the importance of judicial transparency.
The writ petition challenged the CBDT’s Office Memorandum dated 12 September 2025, which clarified that Judges opting for the new tax regime under Section 115BAC of the Income-tax Act, 1961 (corresponding to Section 202 of the Income-tax Act, 2025) would not be entitled to exclude certain statutory allowances from taxation. These allowances include the value of rent-free official residence, conveyance facilities, sumptuary allowance & leave travel concession.
The petitioner contended that the CBDT had fundamentally misunderstood the statutory scheme. Sections 22D of the High Court Judges (Salaries & Conditions of Service) Act, 1954 & 23D of the Supreme Court Judges Act, 1958 do not grant an exemption or deduction from taxable income. Instead, these provisions expressly provide, notwithstanding anything contained in the Income-tax Act, that the specified allowances “shall not be included in the computation of income chargeable under the head Salaries.” Since these amounts are kept outside the computation itself, they cannot be treated as exemptions which stand withdrawn under the new tax regime. The petitioner also argued that the CBDT’s interpretation violated Articles 125 & 221 of the Constitution, which prohibit variation of the salaries & allowances of Judges to their disadvantage after appointment.
The Delhi High Court found considerable force in these submissions. It held, at least prima facie, that the non obstante clauses in Sections 22D & 23D override every provision of the Income-tax Act, including Section 115BAC. More importantly, the Court observed that the statutory language does not create an exemption or deduction. Rather, the allowances are taken completely outside the computation of salary income. In the Court’s words, “an amount which is not even included in the income cannot be said to have been exempted or deducted.” Consequently, the restrictions contained in the new tax regime regarding exemptions & deductions do not, prima facie, affect these statutory allowances.
Pending final adjudication, the Court permitted serving High Court & Supreme Court Judges opting for the new regime to disclose these allowances in the income-tax return under the category “Receipts not in the nature of income” & directed that such returns should not be processed until further orders.
Equally noteworthy is paragraph 3 of the judgment. Before hearing the matter, the Bench made a voluntary disclosure regarding its own tax position. Justice Rajneesh Kumar Gupta stated that he had already filed his return under the new tax regime without claiming the disputed allowances. Justice Dinesh Mehta disclosed that he intended to file his return under the old tax regime so that the controversy would not personally affect him. The Bench recorded these facts “as a judicial propriety” to demonstrate that the issue would not influence its decision or discretion.
This disclosure is unusual & significant. It reflects the principle that justice must not only be done but must also be seen to be done. Recognising that the litigation directly concerned the tax treatment of allowances payable to serving Judges, the Bench proactively addressed any possible apprehension of personal bias. Such transparency is rarely seen in judicial orders & reinforces public confidence in the fairness of the adjudicatory process.
At the same time, the disclosure invites a larger constitutional discussion. The case concerns allowances payable to all serving High Court & Supreme Court Judges. Although the individual members of the Bench explained why they would derive no immediate personal benefit from the outcome, the litigation nevertheless concerns a class to which they belong. This raises the broader question of institutional conflict of interest as distinguished from personal pecuniary interest.
Whether such disclosure is sufficient to satisfy the rule against bias, or whether matters affecting the financial interests of the judiciary as an institution require a different constitutional mechanism, is open to legitimate debate. Nevertheless, paragraph 3 represents an exceptional example of judicial candour, while the interim order itself underscores the Court’s prima facie view that statutory exclusions from the computation of income cannot be equated with tax exemptions merely because the assessee opts for the new tax regime.