In tax dispute over judges’ benefits, Delhi High Court orders halt to processing their ITRs

On Monday, the Delhi High Court ordered a temporary suspension of income tax return processing for judges of the Supreme Court and High Courts. The court directed the Income Tax Department not to process tax demands or refunds for these judges until further notice. The decision came after a dispute over the taxation of allowances provided to judges.

The Delhi Tax Bar Association (DTBA), a group of professionals specializing in direct and indirect tax laws, challenged an office memorandum issued by the Central Board of Direct Taxes (CBDT) in September 2025. This memorandum made certain allowances and exemptions subject to taxation under the new tax regime. The DTBA argued that this memorandum deprived serving judges of a statutory benefit and increased their tax liability.

They also claimed that the memorandum interfered with the independence of the judiciary. Under the old tax regime, specific allowances such as rent-free official housing, conveyance facilities, sumptuary allowance, and leave travel concession were exempt from taxation. However, the new tax regime, introduced in Assessment Year 2021-22, offers lower tax rates but with fewer deductions.

The DTBA claimed that bringing these benefits under the tax net under the new regime was unlawful and amounted to interference in the judiciary. The court, in its interim order on July 22, allowed judges to declare the allowance amount as 'receipts not in the nature of income' under the 'Exempt Income' category on the e-filing portal.

However, the CBDT moved an application to the court on August 5, seeking modification of the July 22 order, arguing that processing returns for judges would require halting the processing of all returns, leading to a massive workload. In response to the department's difficulty, the court asked private secretaries of SC and HC judges who had filed returns under the new regime to provide their PAN details by August 18.

The Income Tax Department was ordered not to process returns for these judges and any resulting demands or refunds were to be kept in abeyance pending the outcome of the DTBA's plea.