2010 (11) TMI 459

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....ome-tax Appellate Tribunal Chandigarh Bench, Chandigarh (in short "the Tribunal"), vide order dated 15.12.1998 passed in RA Nos. 85 and 86/Chandi/98 in Income Tax Appeal Nos. 1015 and 1016/Chandi/97, relating to the assessment years 1994-95 and 1995-96, has referred the following question for the opinion of this Court: "Whether on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the transaction of preparing I-cards according to specifications laid down by the assessee is covered by the provisions of para 7(vi)(b) of CBDT circular no. 681 dated 8.3.94 and therefore did not fall within the purview of Section 194C of the I.T. Act?"   The facts leading to the filing of the present referenc....

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....The CIT(A), after considering the submissions made on behalf of both the sides came to the conclusion that the assessee was not entitled to the benefit of the aforesaid circular dated 8.3.1994 because this circular was held to be illegal and accordingly struck down by the Bombay High Court in the case of Advertising Agency Association of India v. CBDT (1994) 210 ITR 152 and also by Delhi High Court and Madras High Court, and, therefore, the assessee was rightly held liable to pay tax and interest for non-compliance of the provisions of Section 194C of the Act.   Aggrieved by the order of the CIT(A), the assessee preferred further appeal before the Tribunal. The Tribunal allowed the appeal of the assessee. We have heard learned couns....

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..... The said pleas of the assessee also find mention in order of CIT(A). Thus, in such a situation, we feel that where two interpretations are possible, such interpretation which favours the assessee has to be adopted having regard to the decision of the apex Court in the case of Vegetable Products Ltd. (1973) 88 I.T.R. 192. Further, the assessee acted bona fide in this case on the basis of the said belief and did not deduct tax at source. It is also observed that the tax due on payments in question in both the assessment years has been paid by the contract and, therefore, we feel that the alternative submission of the assesee that the object of provisions of section 194C read with section 191 has been met, has to be accepted. Ultimately, no ....