Proviso to s. 36(1)(iii) inserted w.e.f. 1st April, 2004, being amendatory and not clarificatory in nature is operative prospectively and therefore, the same could not be applied to deny the claim for deduction of interest paid by the assessee in the relevant asst. yr. 1989-90.

Leave granted.

In this civil appeal appellant-asses see is denied the benefit of interest allowance under Section 3 (of Income Tax Act, 1961) 6( 1)(iii) of the Income- Tax Act on account of the proviso inserted in that Section with effect from 1.4. 2 0 04.

Howe ever, as held by this Court in the case of De p u t y Co m m i s s i o n e r of Inc o m e Tax V. Co r e He al t h Ca r e Lt d . reported in [20 0 8 ] 2 9 8 IT R 19 4 , 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 Assess ment Year 198 9- 199 0.

We may clarify that according to the Department even without the proviso appellant would not be entitled to the benefit of interest allowance under Section 36 (of Income Tax Act, 1961)( 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.

[ S.H. KA P A D I A ]

New Delhi,

December 0 8, 20 0 8

[ B. SUD E R S H A N R E D D Y ]