Curative amendment to Section 40(a)(ia) held retrospective, so the disallowance based on the earlier view failed.

The Karnataka HC treated the Finance Act, 2010 amendment to Section 40(a)(ia) of the Income-tax Act as curative, because it removed an unintended omission, resolved anomalies and made the provision workable. On that reasoning, the proviso was read as supplying an obvious omission and was given retrospective effect to reflect legislative intent. The Court noted that the issue had already been settled by the Supreme Court and followed earlier authority taking the same view. The disallowance sustained on the contrary interpretation could not stand.

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Issues: Whether the amendment made by the Finance Act, 2010 to Section 40(a)(ia) of the Income-tax Act, 1961 is retrospective and, if so, whether the disallowance sustained by the Tribunal could stand.

Analysis: The amendment was held to be curative in nature, intended to remove anomalies and unintended consequences and to make the provision workable. A proviso supplying an obvious omission in a section may be read into the section to give it a reasonable interpretation, and such an amendment is to be treated as retrospective in operation. The issue was already settled by the Supreme Court, and the same view had been followed by the Court in earlier authority.

Conclusion: The amendment to Section 40(a)(ia) by the Finance Act, 2010 is retrospective, and the disallowance based on the contrary view cannot be sustained.

Ratio Decidendi: A curative amendment that remedies an unintended omission and makes a provision workable is retrospective in operation, and a proviso supplying an obvious omission is to be read into the section to give effect to the legislative intent.

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