Clarificatory amendment to non-resident account exemption applies retrospectively, extending relief to resident-outside-India account holders.

The amendment to section 10(4A) introducing exemption for interest on Non-resident (External) Accounts was treated as clarificatory because it removed an inconsistency between the Income-tax Act and the foreign exchange definition of a person resident outside India. The earlier provision was confined to a non-resident under the Income-tax Act, while the substituted wording was explained in the Board's circular as curing the anomaly that otherwise denied exemption to account holders who were resident outside India under foreign exchange law. On that basis, the amendment was applied retrospectively, and exemption under section 10(4A) was available for the year in question.

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Issues: Whether the amendment to section 10(4A) of the Income-tax Act, 1961, introducing exemption for interest on Non-resident (External) Accounts in favour of a person resident outside India, was clarificatory and applicable retrospectively to assessment year 1981-82, so as to entitle the assessee to exemption.

Analysis: The exemption under the earlier form of section 10(4A) was confined to a non-resident as understood under the Income-tax Act. The substituted provision inserted by the Finance Act, 1982 was explained in the Board's circular as intended to remove the anomaly under which a person resident outside India under section 2(q) of the Foreign Exchange Regulation Act, 1973 could maintain such an account but not obtain exemption if not treated as a non-resident under the Income-tax Act. The change was therefore treated as one made to clarify and remove the existing inconsistency, and the reasoning in the cited precedent supporting retrospective operation of such an amendment was accepted.

Conclusion: The amendment was held to be clarificatory and applicable retrospectively, and the assessee was entitled to exemption under section 10(4A) for the year under consideration.

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