2019 (1) TMI 226 - SC - Income Tax

Court upholds Income Tax Act provision securing dependants' future post-parents' death, urges amendment for grievances.

RAVI AGRAWAL Versus UNION OF INDIA AND ANOTHER

RAVI AGRAWAL Versus UNION OF INDIA AND ANOTHER - [2019] 410 ITR 399 (SC) 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.