Beneficial tax circulars bind revenue authorities until valid withdrawal, and later withdrawal operates only prospectively.

Beneficial tax circulars and departmental clarifications issued under statutory administrative power bind revenue authorities while they remain in force, even if they depart from a strict reading of the charging provision. A later withdrawal does not defeat the assessee's entitlement under an existing favourable clarification, because withdrawal operates prospectively only. Applied to the Karnataka Sales Tax framework on the rate of tax for TV games, the assessing authority was required to follow the Commissioner's beneficial clarification and recompute the assessment accordingly, limiting tax to the clarified rate of 8 per cent.

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Issues: Whether a circular or clarification issued by the Commissioner, being beneficial to the assessee, bound the taxing authorities and governed the rate of tax on TV games; and whether such beneficial clarification could be ignored because it was later withdrawn.

Analysis: The operative principle applied was that revenue authorities cannot take a stand contrary to departmental instructions or clarifications issued under the statutory power of administration. Beneficial circulars are binding on the authorities administering the fiscal statute, even if they depart from a strict reading of the provision, so long as they remain in force. A clarification in favour of the assessee cannot be denied merely because the department later withdrew similar circulars, since withdrawal operates prospectively. The statutory framework under section 3-A(1) and section 3-A(2) of the Karnataka Sales Tax Act, 1957 supported the binding effect of such administrative directions and clarifications regarding rate of tax.

Conclusion: The beneficial clarification was binding on the assessing authority, and the assessee was liable only to tax at 8 per cent as clarified by the Commissioner.

Final Conclusion: The assessment was required to be recomputed in accordance with the Commissioner's clarification, and the petition was disposed of by granting relief to the assessee.

Ratio Decidendi: Beneficial tax circulars and clarifications issued under statutory administrative power bind the revenue authorities until validly withdrawn, and withdrawal of such beneficial instructions operates only prospectively.

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