of Income Tax, Bombay Vs. M/S Kanji Shivji & Co
 INSC 24 (25
A.P.Misra, N.Santosh Hegde
appeal stands referred to a Bench of three Judges because it was found that a
Bench of two learned Judges had taken the view that the conclusion of an
earlier Bench of three learned Judges was difficult to accept. The issue
relates to whether Explanation (2) to Section 40(b) of the Income Tax Act,
1961, introduced with effect from 1st April, 1985, is prospective in operation or only declaratory.
Mohan Das Laxman Das vs. Commissioner of Income Tax (223 I.T.R./825) two
learned judges concluded that the said Explanation was declaratory. This view
was accepted by a Bench of three learned judges in Suwalal Anandilal Jain vs.
Commissioner of Income Tax (224 I.T.R.753).
case of Rashik Lal & Co. vs. Commissioner of Income Tax (229 I.T.R.458)
this view was doubted. A Bench of two learned Judges observed that it was
difficult to accept the proposition that the said Explanation was only clarificatory
for the reason that if what was contained in the said Explanation was already
the law in force, then giving effect to the said Explanation from 1st April, 1985 did not make any sense. But the
Bench immediately noted, "Hkowever, in the case before us, no question of
payment of any interest in involved". In other words, the application of
Section 40(b) and the said Explanation was not really in issue in Rashik Lal's
case relative to the said Explanation must, therefore, betreated as obiter
conclusion of the court in the earlier cases of Brij Mohan Das Laxman Das and Suwalal
Anandilal jain still represents the correct exposition of the law. Fkollowing
these decisions, the civil appeal must be dismissed./ We are abliged to Mr. B.Sen,
learned counsel, for his assistance at our request.
order as to costs.