Retrospective operation of the first proviso to section 43B upheld by reading the provision with its proviso and Explanation 2.

Section 43B of the Income-tax Act was construed together with its first proviso and Explanation 2 to give effect to the legislative intent. The proviso was treated as supplying an obvious omission and as curbing the undue width and unintended hardship that would otherwise arise from section 43B. On that construction, the first proviso was held to operate retrospectively, and the references were answered in favour of the assessee and against the Revenue.

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Issues: Whether the first proviso to section 43B of the Income-tax Act, 1961 is retrospective in operation.

Analysis: The court adopted the Supreme Court's construction that section 43B(a), the first proviso, and Explanation 2 must be read together to effectuate the true intention of the provision. The proviso was treated as supplying an obvious omission and as necessary to remove the undue width and unintended hardship that would otherwise result from section 43B.

Conclusion: The first proviso to section 43B is retrospective in effect, and the references were answered in favour of the assessee and against the Revenue.

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