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
|
Nature of
sumptuary allowance |
Tax
treatment |
|
Granted
for personal or discretionary use |
Taxable |
|
Granted
to meet official expenses and qualifying under Section 10(14) & Rule 2BB |
Exempt (to the extent spent) |
|
No
evidence of official use |
Fully taxable |
Practical Takeaways
|
Recipient |
Tax
Treatment of Sumptuary Allowance |
|
Supreme Court Judges |
Exempt
(statutory exclusion under Supreme Court Judges Act) |
|
High Court Judges |
Exempt
(statutory exclusion under High Court Judges Act) |
|
Other Judicial Officers (State cadre) |
Treated
as entertainment allowance (exemption via CBDT instruction/Section 16(ii)(a))
unless law changes |
|
Other Government Officials / MPs / Ministers |
Taxable
unless specific statutory exemption applies |
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.
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