1999 (5) TMI 2 - SC - Income Tax

Appellant, a judge of the Allahabad High Court - He filed his income-tax return on the basis that the salary that he received as a judge was not liable to tax under the Income-tax Act, 1961 - held that judges can be taxed by Act of Parliament - hence appeal is dismissed

Summary

Issues:
1. Taxability of salary of High Court and Supreme Court judges under the Income-tax Act, 1961.
2. Interpretation of the term 'rupees' in Part D of the Second Schedule in relation to judges' salaries.
3. Inclusion of dearness allowance in 'such allowances' payable to judges under the Constitution.
4. Taxability of judges' salary under the head 'Salaries' or any other head of income under the Income-tax Act, 1961.

Issue 1: Taxability of judges' salary under the Income-tax Act, 1961
The appellant, a judge of the Allahabad High Court, contended that his salary was not liable to tax under the Income-tax Act. The argument was based on the premise that Parliament could not legislate on judges' salaries before a specific amendment date, thus making their salaries non-taxable. However, the court held that the salary of a judge is considered income and is taxable under the Income-tax Act, irrespective of Parliament's ability to legislate on the matter. The court emphasized that judges' salaries are subject to tax just like any other citizen's income.

Issue 2: Interpretation of the term 'rupees' in Part D of the Second Schedule
One of the questions referred to the Constitution Bench related to the interpretation of the term 'rupees' in Part D of the Second Schedule, which specifies the sums payable to judges of the Supreme Court and High Courts. However, this question was deemed irrelevant as it was raised on a writ petition that was withdrawn. Hence, the court did not address this issue in the judgment.

Issue 3: Inclusion of dearness allowance in 'such allowances' payable to judges under the Constitution
The question of whether dearness allowance paid to judges should be considered as part of 'such allowances' under the Constitution was raised but was not answered by the court as it was raised suo moto and deemed unnecessary in the circumstances of the case. Therefore, this issue was not addressed in the judgment.

Issue 4: Taxability of judges' salary under the head 'Salaries' or any other head of income
The appellant argued that judges, not having an employer, do not receive 'salary' and thus should not be taxed under the head of salary. The court rejected this argument, stating that judges do receive salaries as constitutional functionaries, as explicitly mentioned in the Constitution. Therefore, the court held that judges' salaries are taxable as income under the head of salary under the Income-tax Act. The appeal was dismissed based on this reasoning.

In conclusion, the Supreme Court ruled that judges' salaries are taxable under the Income-tax Act, regardless of Parliament's ability to legislate on the matter before a specific amendment date. The court emphasized that judges' salaries are considered income and are subject to tax like any other citizen's income. The judgment dismissed the appellant's appeal on this basis.