Holding

The salary of High Court and Supreme Court judges is income within Section 14 of the Income Tax Act and is taxable as salary.

Summary

A High Court judge filed an income‑tax return asserting that his constitutional salary was not taxable under the Income Tax Act, 1961. The tax authorities rejected his claim and the matter reached the Supreme Court on a special leave petition. The Court considered whether the salaries payable under Articles 125 and 221 of the Constitution could be taxed by a law made by Parliament under Entry 82 of List I, and whether such salaries fall within the head ‘Salaries’ under Section 14 of the Income Tax Act. It held that the judges’ remuneration is indeed a salary, constitutes income within the meaning of Section 14, and is therefore taxable like any other citizen’s income, irrespective of the fact that judges have no employer. The appeal was dismissed.

Issues considered

Whether the salary of a High Court judge (Art. 221) and a Supreme Court judge (Art. 125) is taxable by a law made by Parliament under Entry 82 of List I of the Seventh Schedule.
Whether such salary is taxable under the head ‘Salaries’ of the Income Tax Act, 1961, or any other head under Section 14.

Legislation cited

Constitution of Indias. Article 125, s. Article 221
Income Tax Act, 1961s. 14

Subjects

income taxsalaryjudgesconstitutional lawtaxabilitySection 14Article 125Article 221parliamentary competence

Judgment

A MR. JUSTICE DEOKI NANDAN AGARWALA
v.
UNION OF INDIA AND ANR.

MAY 4, 1999

B [S.P. BHARUCHA, B.N. KIRPAL, S. RAJENDRA BABU, S.S. (

MOHAMMED QUADRI AND M.B. SHAH, JJ.]

Constitution of India, 1950: Articles 125 an 22 I-Income tax-,Salaries
of High Court and Supreme Court Judges-Whether income and is taxable
C under Income Tax Act-Held, yes-Income Tax Act, 1961 : Section 14.

Words & Phrases:

'Salary'-Meaning and scope of in the context of Articles 125 and 221
of the Constitution of India, 1950.
D Appellant, a High Court Judge filed his income tax return claiming
that the salary that he received as a Judge was n:ot liable to tax under the
Income Tax, 1961. The said claim having been rejected by the Income Tax
Officer and the appellate authority, the appellant preferred the present appeal.
-
E The contention of the appellant was that Parliament could not legislate
prior to the amendment of Articles 125 and 221 of the Constitution on the
subject of salaries of High Court and Supreme Court Judges and, therefore,
their salaries were not liable to Income Tax because the definition of 'income'
under Income Tax Act includes 'salary'; a Judge of the High Court and
Supreme Court has no employer and, therefore, what he receives was not
F salary, but remuneration which is not taxable under the head 'salary' under
the Income Tax Act.

Dismissing the appeal, this Court

HELD : 1.1. The salary of a Judge of a High Court and the Supreme
G Court is income and is taxable by Act of parliament in just the same manner
as is the income of any other citizen, [1077-A]

1.2. There is no doubt that prior to the amendment of Articles 1.25 and
221, the Parliament could not have legislated on Judges salaries but that
does not mean that the salary of a Judge is not taxable under the Income Tax
H Act, 1961. The subject of salary of a High Court and Supreme Court Judge
1074
JUSTICEDEOKINANDANAGARWALAv. U.0.1.[BHARUCHA,1.] 1075

-- 1Jnd the subject of tax on income are altogether different.
(1076-G; 1077-A]
A

2. It is true that High Court and Supreme Court Judges have no
employer but that ipso facto, does not mean that they do not receive salaries.
They are constitutional functionaries. Articles 125 and 221 of the Constitution
deal with the 'salaries' of Supreme Court and High Court Judges respectively B
and expressly State that what the Judges receive are 'salaries.' It is not
possible to hold therefore, that what Judges receive are not salaries or that
such salaries are not taxable as income under the head of 'salary'.
(1077-C-D]

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 411 of c
1982.
From the Judgment and Order dated 28.3.81 of the I.T.O., A. Ward,
• Allahabad in the Assessment year 1978-79.

Satish Chandra, P.P. Singh and S.R. Sethia for Appellant.
D
V. Gauri Shanker (F.S. Nariman), (A.C.), S. Rajappa, S.K. Dwivedi, S.W.A.
Quadri, P. Parmeshwaran and G.B. Sathe for the Respondents.
The Judgment of the Court was delivered by
BHARUCHA, J. The appellant was a Judge of the Allahabad High
Court. He filed his income tax return for the Assessment Year 1978-79 on the
E
basis that the salary that he received as a Judge was not liable to tax under
the Income Tax Act. The contention having been rejected both by the l.T.O.
and in appeal, a special leave petition was filed. Leave to appeal was granted
and on 19th April, 1983 the following four questions were referred by two
learned Judges; to a Constitution Bench: F
"l. Whether the salary of a Judge of the High Court of a State
payable under cl.( l) of Art. 221 of the Constitution and the salary of
a Judge of the Supreme Court payable under cl.(1) of Art. 125 is
taxable by a law made by Parliament under Entry 82 of List I of the
Seventh Schedule. G
~
2. Whether the expression 'Rupees' in Part D of the Second
Schedule which stipulates the sums payable to the Judges of the
Supreme Court and the Judges of the High Court implies the purchasing
power equivalent to the goods and services that could be bought in
the year 1950. That is to say, whether the salaries so fixed should be H
1076 SUPREME COURT REPORTS [1999] 2 S.C.R.

A construed as meaning their real value in terms of goods and services
which they could buy at the commencement of the Constitution or do
they represent their nominal value at any given point of time.
-
3. Whether the expression 'such allowances' referred to in cl. (2)
of Art. 125 and cl.(2) of Art. 221 of the Constitution as payable to a
B Judge of the Supreme Court or a Judge of the High Court of a State
includes dearness allowance; and if it is so, whether the dearness
allowance as paid to them from February 1, 1978 is relatable to these
provisions as there appears to be no express law made by Parliament
for that purpose.

c 4. Whether the salary of a Judge of the Supreme Court payable
under cl.(l) of Art. 125 or the salary of a Judge of the High Court of
a State payable under cl.( l) of Art. 221 is not taxable under the head
'Salaries'; and, if it is so, is it taxable under any other head of income
referred to in S.14 of the Income Tax Act, 1961."
D It appears that the second question arose on a writ petition which stood
transferred to this Court and which was withdrawn earlier today. This question
does not, therefore, survive for consideration. The third question, it is said
by learned counsel for the appellant, was raised suo moto by this Court and
-
we do not think, in the circumstances, that it should be answered.
E Learned counsel for the appellant concentrated on the first and fourth
questions. The fundamental question is whether the salary of a High Court
Judge and a Supreme Court Judge was liable to income tax prior to 1st April
1986. It must be stated here that it is not disputed that, with effect from l st
April, 1986 when Articles 125 and 221 stood amended, such salaries are
F taxable because Parliament then became entitled to legislate thereon.

The contention on behalf of the appellant is that Parliament could not
legislate, prior to the said amendment, on the subject of the salaries of High
Court and Supreme Court Judges and that, therefore, their salaries were not
liable to income tax because the definition of 'income' under the Income Tax
G Act includes 'salary'. The argument really is that the levy of income tax upon
salary, by Parliamentary enactment, cuts down the Judges' salaries.

There can be no doubt that prior to the said amendment Parliament
-
could not have legislated on Judges' salaries, but it is a far cry to conclude
therefrom that the salary of a Judge is not taxable under the Income Tax Act.
H The subject of the salary of a High Court and Supreme Court Judge and the
JUSTICEDEOKINANDANAGARWALAv. U.0.1.[BHARUCHA,J.) 1077
subject of tax on income are altogether different and the conclusion that is A
sought to be drawn is quite unacceptable. The salary of a Judge of a High
Court and the Supreme Court is income and is taxable by Act of Parliament
in just the same manner as is the income of any other citizen.

It is contended qua the fourth question that, in any event, a Judge of
a High Court and the Supreme Court has no employer and, therefore, what B
he receives is not salary; accordingly, what he receives as remuneration is not
taxable under the.head of salary under the Income Tax Act. To our mind, there
is a miscon<:eption here. It is true that High Court and Supreme Court Judges
have no employer, but that, ipso facto, does not mean that they do not receive
salaries. They are constitutional functionaries. Articles 125 and 221 of the C
Constitution deal with the 'salaries' of Supreme Court and High Court Judges
respectively and expressly state that what the Judges receive are 'salaries'. It
is not possible to hold, therefore, that what Judges receive are not salaries
or that such salaries are not taxable as income under the head of salary.

The appeal is dismissed. D
S.V.K.I. Appeal dismissed.