- 1 - HC-KAR NC: 2025:KHC:32571-DB STA No. 21 of 2017 C/W STA No. 20 of 2017 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 20TH DAY OF AUGUST, 2025 PRESENT THE HON'BLE MR. JUSTICE S.G.PANDIT AND THE HON'BLE MR. JUSTICE K. V. ARAVIND SALES TAX APPEAL NO.21/2017 C/W SALES TAX APPEAL NO.20/2017 BETWEEN: M/S. P G SHETTY CONSTRUCTION TECHNOLOGY PVT LTD, NO. 1056, KAVITHA VILAS, M.S. ROAD, MYSURU. …APPELLANT (COMMON IN BOTH APPEALS) (BY SRI. CHERIAN PUNNOOSE, ADV.) AND: THE ADDITIONAL COMMISSIONER OF COMMERCIAL TAXES, ZONE-1, GANDHINGAR, BANGALORE. …RESPONDENT (COMMON IN BOTH APPEALS) (BY SRI. ADITYA VIKRAM BHAT, AGA) THESE APPEALS ARE FILED UNDER SECTION 66(1) OF THE KARNATAKA VALUE ADDED TAX ACT, 2003, PRAYING TO SET ASIDE ORDER DATED 24.01.2017 PASSED BY THE ADDL. COMMISSIONER OF COMMERCIAL TAXES, BENGALURU. Digitally signed by MARIGANGAIAH PREMAKUMARI Location: HIGH COURT OF KARNATAKA - 2 - HC-KAR NC: 2025:KHC:32571-DB STA No. 21 of 2017 C/W STA No. 20 of 2017 THESE APPEALS, COMING ON FOR HEARING, THIS DAY, JUDGMENT WAS DELIVERED THEREIN AS UNDER: CORAM: HON'BLE MR. JUSTICE S.G.PANDIT and HON'BLE MR. JUSTICE K. V. ARAVIND ORAL JUDGMENT (PER: HON'BLE MR. JUSTICE S.G.PANDIT) The above two appeals are preferred under Section 66(1) of the Karnataka Value Added Tax Act, 2003, questioning the judgment dated 24.01.2017 passed by the respondent for the assessment year 2008-09 in STA No.20/2017 and for the assessment years 2006-07 and 2007-08 in STA No.21/2017. 2. Heard learned counsel Sri.Cherian Punnoose for the appellant and learned AGA Sri.Aditya Vikram Bhat for respondent-State. Perused the appeal papers. 3. Both the appeals were admitted, by order dated 07.06.2022 to examine the following substantial questions of law: - 3 - HC-KAR NC: 2025:KHC:32571-DB STA No. 21 of 2017 C/W STA No. 20 of 2017 “(1) Whether the Additional Commissioner was right in holding that Tax Deducted at Source amount is not eligible for deduction from the taxable turnover in view of Section 9-A & 9 of the KVAT Act read with proviso to Rule 27(2) of the KVAT Rules, 2005? (2) Whether the Tax Deducted at Source by the Government Department is eligible for deduction from the taxable turnover of the Appellants under Rule 3(2)(h) of the KVAT Rules, 2005? (3) Whether the Additional Commissioner was right in revising the order of the Joint Commissioner of Commercial Taxes (Appeals) dated 20.06.2015 allowing the deduction of TDS from the taxable turnover? 4. Learned counsel for the appellant, in addition to the grounds urged in the appeal memorandum would submit that the issues raised in the present appeals are answered by a co-ordinate bench of this Court in STA No.10/2016 (M/s.LAL CONSTRUCTIONS COMPANY V/S THE STATE OF KARNATAKA) decided on 18.02.2021. Thus, he prays for - 4 - HC-KAR NC: 2025:KHC:32571-DB STA No. 21 of 2017 C/W STA No. 20 of 2017 allowing the present appeals in terms of the said judgment. Further, he submits that SLP against the said judgment is preferred in SLP No.3147/2022. However, he fairly submits that there is no stay against the said judgment. 5. We have gone through the decision in LAL CONSTRUCTIONS COMPANY (supra) and on going through the said decision as well as the impugned order under appeal, we are of the considered opinion that the substantial questions of law raised in the present appeals are answered in the said decision. The relevant paragraphs 7, 8, 9 and 10 in the above said judgment read as follows: “7. We have considered the submission made on both sides and perused the record. Before proceeding further, it is apposite to take note of the relevant extract of Rule 3(2) and (h) of the Rules which provides for amounts which have to be deducted from the total turn over. Rules 3(2) and (h) of the Rules reads as under: “3. Determination of turnover:- (1) xxxxx - 5 - HC-KAR NC: 2025:KHC:32571-DB STA No. 21 of 2017 C/W STA No. 20 of 2017 (2) The taxable turnover shall be determined by allowing the following deductions from the total turnover:- xxxxxxxx (h) All amounts collected by way of tax under the Act”. 8. Thus, from perusal of the aforesaid Rules, it is evident that all the amounts collected by way of tax under the Act shall be deducted from the total turn over. 9. In the instant case, the TDS has been collected from the appellant under the provisions of the Act. Therefore, the amount of TDS to the extent of Rs.23,40,187/- cannot be allowed to be added in the total turn over and the revisional authority has rightly dropped the proceedings in respect of the deduction of tax on the aforesaid amount. However, the aforesaid aspect of the matter has not been appreciated by the Additional Commissioner of Commercial Taxes and it has been erroneously held that the amount of total TDS deducted cannot form part of the exempted turn over in the absence of such provisions of the Act and Rule. - 6 - HC-KAR NC: 2025:KHC:32571-DB STA No. 21 of 2017 C/W STA No. 20 of 2017 10. It is pertinent to note that while recording the aforesaid finding, the Assistant Commissioner of Commercial Taxes failed to appreciate Rule 2(h) of the Rules. Therefore, in view of the preceding analysis, the substantial questions of law involved in this appeal are answered in favour of the appellant and against the respondent.” 6. Respectfully following the above said decision, the present appeals are allowed. Judgment dated 24.01.2017 passed by the Tribunal for the assessment year 2008-09 in STA No.20/2017 and for the assessment years 2006-07 and 2007-08 in STA No.21/2017 are set aside and the substantial questions of law are answered in favour of the appellant. Sd/- (S.G.PANDIT) JUDGE Sd/- (K. V. ARAVIND) JUDGE MPK CT:bms: List No.: 1 Sl No.: 0