Summary
In a public interest writ petition, the Supreme Court declined to give retrospective effect to the Finance Act, 2022 amendment to Section 80DD of the Income Tax Act, 1961, which allows payment to a disabled dependant once the subscriber turns sixty and stops paying. Extending it to older policies would defeat the object of such policies, which provide for the disabled person after the subscriber's death, and would disturb the basis of concluded insurance contracts.
Issues
- Whether the amendment to Section 80DD(2)(a) of the Income Tax Act, 1961 by the Finance Act, 2022, effective 01.04.2023, should be given retrospective operation for policies taken before 2014.
- Whether a subscriber to a scheme under Section 80DD should be permitted to discontinue the policy on attaining sixty years of age and use the accumulated benefit.
Provisions considered
- Section 80DD, Income Tax Act, 1961The Court set out the section as it stood and as amended with effect from 01.04.2023, under which the scheme may pay the disabled dependant on the subscriber's death or once the subscriber turns sixty and stops paying, with new sub-section (3A). It held the amendment operates prospectively and declined to extend it to existing policies. (¶¶ 3, 4, 7, 8)
- Section 21, Finance Act, 2022Noted as the provision by which Parliament amended Section 80DD after the Court's earlier order in the petitioner's previous writ petition; the Court treated the amendment as prospective from 01.04.2023. (¶¶ 4, 5, 9)
Held
- The object of a policy such as the Jeevan Adhar policy under Section 80DD is to provide for a disabled person after the subscriber's or caregiver's death. Allowing the subscriber to discontinue it during his lifetime on turning sixty would run against that object and against the interest of the disabled beneficiary, so the plea for retrospective application to pre-2014 policies was rejected. (¶¶ 7, 8)
- An insurance contract is in a sense a commercial contract with settled terms; its substratum cannot be removed by giving an amendment retrospective operation, and the tax benefit under Section 80DD was availed by subscribers when they subscribed to the policy. (¶ 8)
- Parliament had already amended Section 80DD in response to the Court's earlier order in the petitioner's previous writ petition, and the related contempt petition had been closed on the footing that the grievance stood addressed prospectively; considering the disability rights instruments and enactments as well, the Court saw no reason to take a different view. (¶¶ 7, 9, 10, 11)
Result
Writ petition disposed of without granting retrospective operation to the amendment of Section 80DD; the Court recorded its appreciation of the counsel appointed to assist it.