Whether Sumptuary allowance granted to judicial officer is exempt from payment of Income Tax?

The sumptuary allowance is a specific benefit provided to judicial officers in India to cover entertainment expenses. This allowance raises the question of whether it is exempt from income tax. This article delves into the legal framework governing the sumptuary allowance, including relevant sections of The Supreme Court Judges (Salaries and Conditions of Service) Act, 1958, and The High Court Judges (Salaries and Conditions of Service) Act, 1954.

General tax position (India)

(i)     No specific exemption as “sumptuary allowance”
The Income-tax Act does not provide a blanket exemption merely because an allowance is described as “sumptuary”.

(ii)   Exemption only if it qualifies under specific provisions
An allowance can be exempt only if it falls within:

o  Section 10(14) read with Rule 2BB (allowances granted to meet expenses wholly, necessarily and exclusively incurred in the performance of official duties), or

o  Any specific statutory exemption (e.g., allowances to certain constitutional or statutory authorities).

(iii) Key test – purpose and usage

o   If the allowance is for personal benefit or general lifestyle expenses, it is taxable.

o   If it is strictly for official duties, reimbursing expenses incurred in the course of employment, and satisfies Rule 2BB conditions, it may be exempt to the extent of actual expenditure.

Judicial and administrative view

Courts and tax authorities have consistently held that:

§  Nomenclature is irrelevant.

§  What matters is whether the allowance compensates for official expenditure or is a personal perquisite in disguise.

Express statutory provisions - Exemption for Judges of Supreme Court and High Court under Specific Acts

For Supreme Court and High Court judges, there are express statutory provisions that make sumptuary allowance not includible in taxable salary:

Text of Section 23D of The Supreme Court Judges (Salaries And Conditions of Service) Act, 1958

23D. Exemption from liability to pay Income-tax on certain perquisites received by a Judge. –

Notwithstanding anything contained in the Income-tax Act, 1961 (43 of 1961), –

(a) the value of rent-free official residence provided to a Judge under sub-section (1) of section 23 or the allowance paid to him under sub-section (1A) of that section;

(b) the value of the conveyance facilities provided to a Judge under section 23A;

(c) the sumptuary allowance provided to a Judge under section 23B, shall not be included in the computation of his income chargeable under the head “Salaries” under section 15 of the Income-tax Act, 1961 (43 of 1961).

(d) the value of leave travel concession provided to a Judge and members of his family.

Text of Section 22D in The High Court Judges (Salaries And Conditions Of Service) Act, 1954

22D. Exemption from liability to pay income-tax on certain perquisites received by a Judge. –

Notwithstanding anything contained in the Income-tax Act, 1961 (43 of 1961), –

(a)   the value of rent-free official residence provided to a Judge under sub-section (1) of section 22A or the allowance paid to him under sub-section (2) of that section;

(b)   the value of the conveyance facilities provided to a Judge under section 22B;

(c)    the sumptuary allowance provided to a Judge under section 22C;

(d)   the value of leave travel concession provided to a judge and members of his family,

shall not be included in the computation of his income chargeable under the head “Salaries” under section 15 of the Income- tax Act 1961 (43 of 1961).

Supreme Court Judges Act, 1958

§  Section 23D: Grants sumptuary allowance to Chief Justice and other Supreme Court judges.

§  Section 23D: States that sumptuary allowance shall not be included in computation of income under the head “Salaries” for these judges, notwithstanding anything in the Income-tax Act.
This creates a statutory tax exemption for sumptuary allowances to Supremee Court judges.

High Court Judges (Salaries and Conditions of Service) Act, 1954

§  Section 22D: Grants sumptuary allowance to High Court judges.

§  Section 22D: Provides that sumptuary allowance shall not be included in computing taxable salaries.

§  This extends the statutory exemption to High Court judges.

NOTE : The definition of the word ‘Judge’ as defined under section 2(g) of the 1954 Act, that judge means only a sitting High Court Judge, not a retired High Court Judge. Therefore, the retired Chief Justices and Judges of the High Court cannot be brought under the exemptability clause contained under section 22D of the 1954 Act. [Justice Challa Kondaiah v. CIT (2001) 252 ITR 854 : 119 Taxman 511 (2002) 173 CTR 159 (AP)]

Summary: Under these provisions, sumptuary allowances paid to Supreme Court and High Court judges are exempt from income tax, because they are expressly excluded from computation of salary income.

Administrative (CBDT) Clarifications

The Central Board of Direct Taxes (CBDT) vide Letter F. No. 35/32/66-IT(B), Dated 24.09.1966 has issued instructions interpreting sumptuary allowance in the context of the Income-tax Act:

CBDT Letter F. No. 35/32/66-IT(B), Dated 24.09.1966

Subject : Section 17 of the income-tax act, 1961 – Salary, Perquisite and Profits in lieu of salary – Sumptuary Allowance being in the nature of entertainment allowance not to be included in term “salary” for the purposes of determining perquisite value of residential accommodation under rule 3(a) of Income-Tax Rules

According to the Board’s instruction “sumptuary allowance” has to be treated as an entertainment allowance. In view of this, the sumptuary allowance received by a person, who is in receipt of salary from the Government, to the extent that such allowance is required to be deducted in computing the income chargeable under the head “Salaries” under section 16(ii)(a), may be regarded as an allowance exempted from payment of income-tax. Allowance in the nature of entertainment allowance, to the extent such allowance is deductible under clause (ii) of section 16 is excluded from the term “salary” under Explanation (2)(iv) [as it stood before the amendment made by the Income-tax (Amendment) Rules, 1974, to rule 3(a) of the Income-tax Rules, and, therefore, sumptuary allowance may not be included in the term “salary” for the purposes of said rule.

CBDT Letter F. No. 35-32/66-IT(B), dated 24.09.1966 : The Board stated that sumptuary allowance is in the nature of entertainment allowance. To the extent that an entertainment allowance was deductible under Section 16(ii)(a), it was excluded from the term “salary” for determining taxable salary.

NOTE: This CBDT instruction predates later statutory exemptions for judges and applies mainly when considering sumptuary allowance as an entertainment allowance. Modern tax practice relies more on specific statutory exclusion for judges rather than only on this instruction.

Case Law / Tribunal Position

Assumption of jurisdiction u/s. 154 by Assessing Officer - denial of deduction on account of Sumptuary Allowance for computing the income from Salary - Assessee is an individual and is an employee under the West Bengal Judicial Services - HELD THAT:- Assessing Officer has referred to the CBDT instruction dated 24.09.1966 in order to treat sumptuary allowance as entertainment allowance and made the said adjustment. Since the facts relating to sumptuary allowance is appearing in the revised return itself and it was not any new information but for computing the correct income and also for rectifying the apparent mistake committed while framing the assessment, ld. Assessing Officer has made the said adjustment u/s 154 of the Act. We are therefore, of the view that legal issue raised by ld. Counsel for the assessee has no merit and hence, ground nos. 1 & 2 are accordingly dismissed.

Merits of the case as observed that assessee has relied on the decision of Ajay Godara v. ITO (2018 (6) TMI 1845 - ITAT Jaipur, wherein similar issue of sumptuary allowance was for consideration and this Tribunal held that sumptuary allowance is exempt from payment of tax - Thus we are inclined to hold in favour of the assessee and delete the addition. Assessee appeal is partly allowed. – [Anirban Chowdhury v. ITO, Hooghly - 2023 (12) TMI 638 (ITAT Kolkata)]

In one Income Tax Appellate Tribunal (ITAT) Jaipur Bench (Ajay Godara v. ITO, Jaipur 2018 (6) TMI 1845 – (ITAT Jaipur) decided on 19.06.2018 for the Assessment year 2011-12, the decision illustrates the treatment of sumptuary allowance:

CIT(A) has rejected the claim of the assessee on the ground that the assessee has not brought on record any section, notification, circular etc. as issued by the CBDT - We find that the CBDT vide letter No. 35/32/66-IT(B), dated 24.09.1966 has made it clear that sumptuary allowance has to be treated as an entertainment allowance and accordingly, the said allowance received by a person who is in receipt of salary from the Government, to the extent of such allowance are required to be deducted in computing the income chargeable under head salaries under section 16(ii)(a) - Thus, the CBDT circular has clarified that this allowance may be regarded as entertainment allowance and exempt from payment of income tax. We hold that the Sumptuary allowance is exempt from payment of income tax and accordingly to be excluded as a deduction while computing income under the head salary.

§  A judicial officer claimed sumptuary allowance as exempt.

§  The Tribunal noted arguments based on the Shetty Commission and CBDT instruction treating sumptuary allowance as an entertainment allowance.

§  The Tribunal accepted that, as per CBDT’s instruction, sumptuary allowance could be regarded as an allowance exempt from income tax when deducted under Section 16(ii)(a) and excluded from salary.

Interpretation: For judicial officers not governed by the High Court/Supreme Court Acts (e.g., district judges under state service rules), taxability may be governed by CBDT instruction and not statutory exemption - making the allowance exempt only to the extent of treatment as entertainment allowance under salary computation rules.

Judicial Decisions on Allowances Generally

§  Allowances are taxable unless specifically exempted under the Income-tax Act itself.

§  Constitutional provisions fixing allowances do not inherently grant tax exemption; exemption must be provided by statute.

Although specific appellate case law on sumptuary allowance itself is limited, this broader principle underscores that tax exemption must be statutory for judges or others.

Taxability of Sumptuary Allowance for Other Officials

For government officials other than Supreme Court/High Court judges or those not covered by the Judges Acts:

§  Sumptuary allowance is generally a component of salary and taxable under the Income-tax Act unless:

o  It qualifies as an entertainment allowance with deduction under Section 16(ii)(a) prior to inclusion in gross salary, or

o  It meets conditions under Section 10(14) (expenses wholly, necessarily, exclusively incurred in performance of duties).

§  Without these conditions, sumptuary allowance is treated as taxable income.

There is no automatic blanket exemption for sumptuary allowances paid to ministers (e.g., MPs), central government officers, or state officials simply by nomenclature. Exemption in those cases depends on specific provisions (e.g., Section 10(17) or explicit legislative exemption), which do not generally apply to sumptuary allowances outside judges’ statutes.

Practical summary

Practical Takeaways

Conclusion

Sumptuary allowance is not per se exempt from income tax. It is taxable unless it clearly qualifies as an allowance for official duties under the specific exemption provisions of the Income-tax Act.

§ For Supreme Court & High Court judges, sumptuary allowance is not taxable, as the respective Acts expressly exclude it from salary computation.

§ For other judicial officers, administrative instructions classify it as entertainment allowance, yielding an exemption under specific salary deduction rules but not a broad statutory exemption.

§ For other officials, taxability follows standard salary rules: it is generally taxable unless specific provisions apply.