L.K. Trust vs Commissioner of Income Tax and Another

Leave granted.

In this civil appeal appellant-assessee is denied the benefit of interest allowance u/s 36(1)(iii) of the Income Tax Act on account of the proviso inserted in that section with effect from 1-4-2004. However, as held by this Court in the case of Deputy Commissioner of Income Tax, Ahmedabad Vs. Core Health Care Ltd., the said proviso is amendatory and not clarificatory in nature. In the circumstances, the proviso would operate prospectively. That proviso could not have been applied to deny the claim of the assessee for deduction on account of interest paid by it because in this case we are concerned with the assessment year 1989-90.

We may clarify that according to the department even without the proviso appellant would not be entitled to the benefit of interest allowance u/s 36(1)(iii) as it stood at the material time. We express no opinion on that point in this case.

Accordingly, this civil appeal stands allowed and the matter is remitted to the High Court for its decision in accordance with law.