1998 (9) TMI 58 - HC - Income Tax

Summary

Issues: Claim for deduction under section 80U of the Income-tax Act, 1961. Application of section 80U for assessment years 1986-87 to 1988-89. Interpretation of rules regarding permanent physical disability. Consideration of earning capacity in relation to disability for claiming relief under section 80U.

Analysis:
The judgment concerns the rejection of an assessee's claim for deduction under section 80U of the Income-tax Act, 1961. The assessee, suffering from a permanent physical disability of more than 50% in the right leg since January 1979, sought relief under section 80U for the assessment years 1986-87 to 1988-89. The Commissioner denied the claim citing an increase in the assessee's income over the years, indicating no reduction in capacity for gainful employment. The assessee argued that the relief under section 80U is intended for handicapped individuals, regardless of income rise, emphasizing the need to consider the effect of disability on earning capacity.

The counsel for the assessee contended that the Commissioner's decision was contrary to the purpose of section 80U, meant to benefit handicapped individuals. Reference was made to section 80U(2) of the Act, emphasizing the importance of considering the impact of disability on earning capacity. The counsel highlighted rule 11D of the Income-tax Rules, specifying criteria for permanent physical disability, which the assessee met with a disability of more than 50% in one limb. The judgment emphasized that the disability specified under the rules automatically implies an adverse effect on earning capacity, eliminating the need for further inquiry.

The judgment stressed that the objective of section 80U is to provide relief to handicapped individuals, irrespective of income levels. It was noted that the assessee's physical disability would limit mobility and efficiency, affecting earning capacity. The judgment highlighted the need for a liberal interpretation of section 80U, as observed by the Allahabad High Court in a previous case. It was emphasized that denial of benefits based solely on income rise would defeat the purpose of the provision. The judgment differentiated between the assessment years, dismissing the claim for 1986-87 due to procedural reasons but allowing relief for 1987-88 and 1988-89, quashing the previous orders and granting the deduction under section 80U for those years.