Allowances of Constitutional Court Judges Are Outside “Salary” Computation Under the New Tax Regime: Section 22D/23D Override Section 115BAC

1. Introduction

In DELHI TAX BAR ASSOCIATION THROUGH ITS SECRETARY K G BANSAL v. UNION OF INDIA & ANR. (2026 DHC 5845-DB, decided on 22-07-2026), a Division Bench of the Delhi High Court (Dinesh Mehta, J. and Rajneesh Kumar Gupta, J.) considered a challenge to the CBDT’s Office Memorandum dated 12.09.2025. The Memorandum purported to “clarify” how certain allowances/perquisites payable to High Court Judges under Section 22D of the High Court Judges (Salaries and Conditions of Service) Act, 1954 would be treated when a Judge opts for the “new tax regime” under Section 115BAC of the Income-tax Act, 1961 (and its counterpart in the Income Tax Act, 2025).

The petitioner, a Bar association, asserted locus by stating that its members file and advise on tax matters for Judges, and claimed a broader institutional concern for judicial independence and dignity. The immediate controversy was practical as well as legal: the e-filing utility reportedly did not provide a clear mechanism to reflect these Judge-specific statutory exclusions in returns filed under the “new regime,” and the CBDT Memorandum indicated that the new regime’s “no exemption/deduction” design would disallow such relief.

The key issues before the Court (at the interim stage) were:

  • Whether Section 22D (and by parity Section 23D of the Supreme Court Judges statute) overrides the Income-tax Act, including Section 115BAC, by virtue of its non-obstante clause.
  • Whether the statutory treatment of specified judicial allowances is an “exemption/deduction” (potentially barred under the new regime) or an exclusion from computation of “salary” income altogether.
  • What interim arrangement should govern return-filing and processing for Judges pending final adjudication.

The petitioner also invoked the constitutional backdrop—Articles 125 and 221—arguing that judicial salaries/allowances cannot be varied to the Judges’ detriment after appointment, and that an executive “clarification” impairing statutory allowances raises concerns touching judicial independence.

2. Summary of the Judgment (Interim Order)

The Court issued an interim order after forming a prima facie view that:

  1. Section 22D (and Section 23D) have overriding effect over the Income-tax Act, including Section 115BAC, because they begin with a non-obstante clause (“Notwithstanding anything contained in the Income-tax Act, 1961…”).
  2. The statutory language in Section 22D does not merely grant an “exemption” or “deduction.” It provides that the specified values “shall not be included in the computation” of income chargeable under the head “Salaries” under Section 15 of the Income-tax Act. Therefore, an amount excluded from the computation cannot be treated as an exemption/deduction that would be disallowed under Section 115BAC.

Pending further consideration, the Court directed:

  • All Hon’ble Judges of the Supreme Court and High Courts may file their returns (or revised returns) under the new regime by reflecting the amounts covered by Section 22D/23D under the e-filing dashboard path: “Exempt Income” → “other incomes” → “receipts not in the nature of income.”
  • Such returns shall not be processed until further orders.

Procedurally, the respondents were granted time to file a reply, and the matter was listed for further hearing.

3. Analysis

3.1 Precedents Cited

The interim order does not cite prior judicial precedents by case name. Instead, it is anchored in statutory interpretation and constitutional structure. The Court’s analysis turns primarily on:

  • Section 22D of the High Court Judges (Salaries And Conditions Of Service) Act, 1954
  • (By reference) Section 23D of the Supreme Court Judges Act (Salaries and Conditions of Service), 1958
  • Section 15 (head of income “Salaries”) and Section 115BAC (new tax regime) of the Income-tax Act, 1961
  • Constitutional principles indicated by Articles 125 and 221

The absence of cited case law is itself noteworthy: the Court treated the issue as turning on the textual force of a non-obstante clause and the classification of the statutory benefit as “outside computation,” rather than on a competing line of precedent about exemptions under concessional regimes.

3.2 Legal Reasoning

(a) Non-obstante clause as an overriding command

The Court’s prima facie conclusion begins with the structure of Section 22D:

“Notwithstanding anything contained in the Income-tax Act, 1961 … [specified values] shall not be included in the computation of his income chargeable under the head ‘Salaries’ under section 15 of the Income-tax Act…”

A non-obstante clause is a legislative device used to confer priority to one provision over any conflicting provisions in the referenced law. On that logic, once Section 22D says “notwithstanding anything” in the Income-tax Act, the later introduction of Section 115BAC cannot—without an equally clear overriding repeal/amendment—neutralize Section 22D’s command.

(b) Exemption/deduction vs. exclusion from computation

The CBDT’s position (as described by the petitioner) was that the new regime is a trade-off: moderate rates, but “no deductions/exemptions,” and thus the allowances should not be “exempted.”

The Court accepted (prima facie) a crucial distinction emphasized by the petitioner:

  • An exemption/deduction typically presupposes the amount forms part of taxable income but is later reduced or relieved by a deduction or exemption provision.
  • An exclusion from computation means the amount is never brought within the charging computation under the specified head (here, “Salaries”) in the first place.

The Court expressed this in plain terms: “an amount which is not even included in the income cannot be said to have been exempted or deducted”. This framing directly undercuts the “no exemptions/deductions” argument as a category error—because Section 22D does not operate as a typical tax exemption but as a statutory direction about how salary income is to be computed for Judges.

(c) Institutional sensitivity and disclosure

The Bench also recorded a disclosure about their own return-filing positions to avoid any apprehension of personal interest influencing the decision. While not a doctrinal holding, this reflects an institutional approach to judicial propriety in a matter bearing on Judges’ taxation.

(d) Interim procedural solution: how to file returns

The Court’s interim direction to reflect the amounts under “receipts not in the nature of income” is best understood as a workaround to prevent immediate adverse consequences from the e-filing utility’s design while preserving the parties’ legal positions. It also signals the Court’s prima facie belief that these sums are not to be treated as taxable “salary” receipts, even under the new regime.

3.3 Impact

(a) Immediate operational impact on tax administration

The direction that Judges’ returns filed in this manner “shall not be processed” is significant. It:

  • Freezes downstream consequences (demands, adjustments, notices) pending adjudication.
  • Prevents inconsistent treatment across jurisdictions for similarly placed Judges.
  • Places an interim restraint on the executive’s “clarificatory” stance being operationalized through automated processing.

(b) Guidance on interpreting special-service statutes vs. general tax regimes

The Court’s prima facie reasoning suggests a broader interpretive principle: where a special statute governing constitutional functionaries uses a non-obstante clause and directs non-inclusion in computation, it may survive later, general, optional tax regimes unless Parliament expressly amends or overrides that special statute.

(c) Potential constitutional resonance (though not finally decided)

The petitioner’s reliance on Articles 125 and 221 situates the dispute within the constitutional guarantee against detrimental variation of Judges’ service conditions. While the interim order does not conclusively determine the constitutional issue, the Court’s willingness to grant protective directions indicates that the matter is not being treated as a routine “exemption” dispute but as one with potential institutional/constitutional implications.

(d) Future disputes likely to be shaped by the “computation” framing

If affirmed at final hearing, the holding would be used to resist administrative attempts to re-label statutory “non-inclusion” benefits as “exemptions” barred by concessional regimes. It could also influence how e-filing utilities are designed—i.e., to accommodate legislatively mandated exclusions that do not fit standard deduction/exemption fields.

4. Complex Concepts Simplified

Non-obstante clause
A legislative phrase like “Notwithstanding anything contained in…” that gives the provision priority over conflicting parts of another law. Here, Section 22D is designed to prevail over the Income-tax Act where there is inconsistency.
Computation vs. exemption/deduction
“Computation” is the step where the tax law determines what counts as income under a head (like “Salaries”). Section 22D says certain values are not to be included in that computation at all—different from an exemption/deduction that reduces taxable income after inclusion.
Section 115BAC (new tax regime)
An optional regime offering concessional rates typically conditioned on forgoing many deductions/exemptions. The dispute was whether Judge-specific statutory non-inclusions are swept into this “forgoing” requirement.
Processing of returns
The automated/administrative step where the tax department finalizes computation, makes adjustments, raises demands or issues refunds. The Court paused this step to prevent irreversible consequences before the legal question is decided.

5. Conclusion

This interim decision establishes a strong prima facie principle: the allowances/perquisites enumerated in Section 22D (and similarly Section 23D) are not merely “tax exemptions” to be surrendered under the new regime, but are statutorily excluded from the computation of salary income, and the non-obstante clause gives these provisions overriding force even against Section 115BAC.

Equally important is the Court’s pragmatic interim architecture—directing a standardized method to disclose these amounts in the e-filing portal and restraining processing—to preserve uniformity, prevent immediate detriment, and keep the institutional stakes (including the constitutional protection of judicial service conditions) insulated until final adjudication.