2019 (1) TMI 226 - SC - Income Tax

Applicability of provisions of Section 80DD - payment of annuity of lump sum amount for the benefit of a dependant, being a person with disability, in the event of the death of the individual or the member of the Hindu Undivided Family (HUF) in whose name subscription to the scheme stipulated in the said provision has been made - Petition is stated to be filed in the interest of handicapped children whose parents have taken Jeevan Aadhar Policy (Table 114) from the Life Insurance Corporation of India (for short, LIC ) for the livelihood of their children - grievance of the petitioner is that benefit of Jeevan Aadhar policy should not be deferred till the death of the assessee/life assured and it should be allowed to be utilised for the benefit of the disabled person even during the lifetime of the assessee. Held that - As noted from the provisions of Section 80DD as well as from the explanatory memorandum of the Finance Bill, 1998, by which this provision was added, the purpose is to secure the future of the persons suffering from disability, namely, after the death of the parent/guardian. The presumption is that during his/her lifetime, the parent/guardian would take care of his/her handicapped child. The prayer is that Section 80DD of the Act be suitably amended. This Court cannot give a direction to the Parliament to amend or make a statutory provision in a specified manner. The Court can only determine, in exercise of its power of judicial review, as to whether such a provision passes the muster of the Constitutional Scheme. Though, there is no specific prayer in this behalf, but in the body of writ petition, argument of discrimination is raised. Here, we find that the respondents have been able to successfully demonstrate that the main provision is based on reasonable classification, which as a valid rational behind it and there is a specific objective sought to be achieved thereby. The petitioner may be justified in pointing out that there could be harsh cases where handicapped persons may need the payment on annuity or lumpsum basis even during the lifetime of their parents/guardians. Where guardian has become very old but is still alive, though he is not able to earn any longer or he may be a person who was in service and has retired from the said service and is not having any source of income. In such cases, it may be difficult for such a parent/guardian to take care of the medical needs of his/her disabled child. Even when he/she has paid full premium, the handicapped person is not able to receive any annuity only because the parent/guardian of such handicapped person is still alive. There may be many other such situations. It is for the Legislature to take care of these aspects and to provide suitable provision by making necessary amendments in Section 80DD. In fact, the Chief Commissioner for Persons with Disabilities has also felt that like other police holders, Jeevan Aadhar policy should also be allowed to mature after 55 years of age of the proposer and the annuity amount should be disbursed through the LLCs or National Trust. Writ petition by urging upon respondent No.1 to have a relook into this provision by taking into consideration all the aspects, including those highlighted by the Court in this judgment, and explore the possibility of making suitable amendments

Summary

Issues Involved:
1. Validity of the provision under Section 80DD of the Income Tax Act, 1961.
2. Legality of the Circular No. CO/CRM/PS/622/23 dated January 24, 2008.
3. Alleged violation of the fundamental right of equality under Article 14 of the Constitution.
4. Petitioner's grievance regarding non-payment of annuity or lump sum amount during the lifetime of the parent/guardian.
5. Petitioner's request for amendments to Section 80DD and the Jeevan Aadhar Policy (Table 114).

Detailed Analysis:

1. Validity of the provision under Section 80DD of the Income Tax Act, 1961:
The provision under Section 80DD of the Income Tax Act, 1961, allows for a deduction from gross total income for expenditure incurred on medical treatment, training, and rehabilitation of a dependant with a disability or for amounts paid or deposited under a scheme framed by the Life Insurance Corporation (LIC) or other insurers. The deduction is contingent upon the scheme providing for payment of annuity or lump sum amount for the benefit of the dependant upon the death of the individual or member of the Hindu Undivided Family (HUF) who subscribed to the scheme. The Court noted that the purpose behind this provision is to secure the future of persons with disabilities after the death of their parent/guardian.

2. Legality of the Circular No. CO/CRM/PS/622/23 dated January 24, 2008:
The Circular issued by the Income Tax Department clarified that no benefit could be paid to the dependant until the proposer/life assured survives. This Circular was challenged by the petitioner, who argued that it denies the benefit of the insurance to handicapped persons during the lifetime of their parents/guardians. The Court acknowledged that the Circular aligns with the legislative intent of Section 80DD, which aims to provide financial security to dependants with disabilities after the death of the parent/guardian.

3. Alleged violation of the fundamental right of equality under Article 14 of the Constitution:
The petitioner argued that the provision and the Circular violate the fundamental right to equality under Article 14 of the Constitution, as beneficiaries of other life insurance policies receive annuity during the lifetime of the policyholder. The Court, however, found that the classification under Section 80DD is reasonable and has a valid objective, which is to secure the future of dependants with disabilities after the death of their parents/guardians. The Court cited several judgments to support the principle that taxation laws and economic regulations enjoy a greater latitude in classification.

4. Petitioner's grievance regarding non-payment of annuity or lump sum amount during the lifetime of the parent/guardian:
The petitioner contended that the provision and the Circular deny the benefit of the insurance to handicapped persons during the lifetime of their parents/guardians, even when the entire premium has been paid. The Court recognized the petitioner's grievance but emphasized that the legislative intent behind Section 80DD is to provide financial security to dependants with disabilities after the death of the parent/guardian. The Court noted that the provision is designed to address the anxiety of parents/guardians regarding the future of their disabled dependants.

5. Petitioner's request for amendments to Section 80DD and the Jeevan Aadhar Policy (Table 114):
The petitioner sought amendments to Section 80DD and the Jeevan Aadhar Policy to allow for the payment of annuity or lump sum amount to dependants with disabilities upon the parent/guardian attaining a certain age, in addition to the event of death. The Court observed that while the petitioner's concerns are valid, it is not within the Court's purview to direct the Parliament to amend the statute. The Court urged the respondent (Union of India) to reconsider the provision and explore the possibility of making suitable amendments to address the petitioner's concerns.

Conclusion:
The Court dismissed the writ petition but urged the Union of India to re-examine the provision under Section 80DD of the Income Tax Act, 1961, and consider making necessary amendments to address the concerns raised by the petitioner. The Court emphasized that the legislative intent behind the provision is to secure the future of dependants with disabilities after the death of their parents/guardians, and any changes to this provision should be made by the Legislature.