Substantive tax amendments apply prospectively only when no clear retrospective intent exists for the assessment year.

A substantive amendment enlarging taxable income under the Income-tax Act cannot be applied to an assessment year that had already commenced unless the legislature clearly gives it retrospective effect. The relevant liability was governed by the law in force on 1 April 1946, when the assessment year began, and the later proviso inserted on 4 May 1946 could not be used to include the disputed sum in the assessee's total income for 1946-47. The principle applied was that, absent express retrospective language, a taxing amendment operates only prospectively, even if the assessment is completed after the amendment takes effect.

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Issues: Whether the sum of Rs. 9,26,532 could be included in the assessee's total income for the assessment year 1946-47 on the strength of the fourth proviso to Section 10(2)(vii) of the Indian Income-tax Act, when that proviso came into force only on 4 May 1946 and the relevant assessment year commenced on 1 April 1946.

Analysis: The liability to tax for the assessment year was governed by the provisions of the Income-tax Act as they stood on 1 April 1946, because the Finance Act for the year adopted the total income determined in accordance with the Income-tax Act in force on that date. The amendment introducing the fourth proviso was a substantive one which enlarged the taxable quantum, and there was nothing in the amending Act to make it retrospective or to deem it operative from the beginning of the assessment year. The principle applied was that a substantive taxing amendment cannot be applied retrospectively in the absence of clear legislative intent, even though the assessment may be made after the amendment comes into force.

Conclusion: The sum of Rs. 9,26,532 was not properly includible in the assessee's total income for the assessment year 1946-47, and the answer to the reference was in the negative.

Ratio Decidendi: A substantive amendment to a taxing provision does not apply to an assessment year already commenced unless the legislature clearly gives it retrospective effect; the governing law is the law in force at the start of the assessment year.

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