The Delhi High Court has directed Supreme Court and High Court judges covered by its interim order on taxation of judicial allowances to provide their Permanent Account Number (PAN) and return-filing details to the Income Tax Department.
The direction is aimed at ensuring that tax returns filed by judges are not processed while the Court considers whether certain allowances can be excluded from taxable income under the new tax regime.
A Division Bench of Justice Dinesh Mehta and Justice Rajneesh Kumar Gupta passed the direction while considering a plea by the Income Tax Department seeking modification of an earlier interim order.
The Court has now asked the private secretaries of the judges concerned to send the judge’s name, assessment year, PAN, date of filing and acknowledgement number to a designated Income Tax Department official by August 18.
If a return or revised return is filed subsequently, its details must be forwarded within 12 hours.
The direction follows the Court’s July 22 order, under which judges who had opted for the new tax regime were permitted to describe certain allowances as “receipts not in the nature of income”. The Court had also directed that such returns should not be processed until further orders.
The dispute stems from a September 2025 Office Memorandum issued by the Central Board of Direct Taxes (CBDT).
The memorandum took the position that judges choosing the new tax regime could not claim the tax treatment applicable to rent-free official accommodation, conveyance facilities, sumptuary allowance and leave travel concession. The tax authorities maintained that the new regime was structured around lower tax rates accompanied by restrictions on deductions and exemptions.
The Delhi Tax Bar Association challenged that position before the High Court.
Its case is that the disputed allowances are not deductions or exemptions being claimed against taxable income. Instead, the Association relies on Section 22D of the High Court Judges (Salaries and Conditions of Service) Act, 1954 and Section 23D of the Supreme Court Judges (Salaries and Conditions of Service) Act, 1958, which specifically provide for their exclusion while computing salary income.
In its July 22 order, the High Court had prima facie accepted this argument and observed that the statutory provisions governing judges’ salaries would prevail over the Income Tax Act, including Section 115BAC, which deals with the new tax regime.
The Income Tax Department subsequently sought a modification of the order, explaining that tax returns are processed electronically through a centralised system. The system, it said, cannot automatically distinguish a return filed by a sitting judge from those filed by other taxpayers.
The Department argued that implementing the earlier direction without identifying the relevant returns could effectively require a halt to processing returns across the board.
The High Court’s latest order provides a mechanism to identify the judges’ returns without disrupting the wider tax-processing system.
The Court has further directed that returns identified through the information supplied by the judges should not be processed until the case is decided.
With the Department expecting nearly 98 percent of returns to be processed automatically by the end of August, the Court has also addressed the possibility that some judges’ returns may already have been processed.
Where a tax demand has already been raised, recovery will remain in abeyance until the petition is decided. Refunds relating to the disputed returns will also not be released during the pendency of the proceedings. Any refunds that have already been issued will remain subject to the final outcome of the case.
The matter has been listed for further hearing on September 3.
