M/S SUTURES INDIA (P) LTD vs. THE DEPUTY COMMISSIONER OF INCOME TAX

1 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 13TH DAY OF JULY 2021 PRESENT THE HON’BLE MR. JUSTICE ALOK ARADHE AND THE HON’BLE MR. JUSTICE HEMANT CHANDANGOUDAR I.T.A. NO.564 OF 2017 BETWEEN: M/S. SUTURES INDIA [P] LTD., REP. BY ITS MANAGING DIRECTOR SRI. S. SUBRAMANIAN NO.472/D, IV PHASE, 13TH CROSS PEENYA INDUSTRIAL AREA BENGALURU-560008 PAN:AACCS6580N. ... APPELLANT (BY SRI. A. SHANKAR, SR. COUNSEL AND SRI. V. CHANDRASHEKAR, ADV., FOR SRI. M. LAVA, ADV.,) AND: THE DEPUTY COMMISSIONER OF INCOME-TAX CIRCLE-12(3) PRESENTLY CIRCLE-6(1)(2), 2ND FLOOR BMTC BUILDING, 80 FEET ROAD KORAMANGALA, BANGALORE-560095. ... RESPONDENT (BY SRI. K.V. ARAVIND, ADV.,) - - - THIS I.T.A. IS FILED UNDER SEC. 260-A OF INCOME TAX ACT 1961, ARISING OUT OF ORDER DATED 15.03.2017 PASSED IN ITA NO.872/BANG/2013 & ITA NO.1397/BANG/2014 FOR THE ASSESSMENT YEARS 2009-10 & 2010-11, PRAYING TO:

2 (i) FORMULATE THE SUBSTANTIAL QUESTION OF LAW STATED ABOVE AND THE ANSWER THE SAME IN FAVOUR OF THE APPELLANT. (ii) ALLOW THE APPEAL AND SET ASIDE THE FINDINGS TO THE EXTENT WHICH IS AGAINST THE APPELLANT IN THE COMMON ORDER PASSED BY THE INCOME TAX APPELLATE TRIBUNAL IN ITANO.872/BANG/2013 & 1397/BANG/2014 FOR THE ASSESSMENT YEARS 2009-10 & 2010-11 DTD:15.3.2017 RESPECTIVELY. THIS I.T.A. COMING ON FOR HEARING, THIS DAY, ALOK ARADHE J., DELIVERED THE FOLLOWING: JUDGMENT This appeal under Section 260A of the Income Tax Act, 1961 (hereinafter referred to as the Act for short) has been preferred by the assessee. The subject matter of the appeal pertains to the Assessment years 2009-10 & 2010-11. The appeal was admitted by a bench of this Court on the following substantial questions of law: "(a) Whether the Tribunal was justified in law in holding that the exports made through third parties are not entitled for deduction under section 10B of the Act on the facts and circumstances of the case and consequently gave a perverse finding? (b) Whether the authorities below are justified in law in not

3 appreciating that the sales made to third parties as well other 100% Export Oriented Units are deemed exports under EXIM Policy and should also be treated as export under section 10B of the Act on the facts and circumstances of the case? (c) Whether, the Tribunal was justified in law in ignoring the decision of the Hon'ble Jurisdictional Karnataka High Court in the case of Tata Elxsi Vs. ACIT reported in 127 DTR 327 and consequently passed a perverse order on the facts and circumstances of the case? (d) Whether the authorities below are justified in law in charging interest under section 234 C of the Act on the facts and circumstance of the case?" 2. Facts leading to filing of this appeal briefly stated are that the assessee is a private limited company and is engaged in the business of manufacture and sale of surgical products. The assessee had filed return of income for the Assessment Year 2009-10

4 declaring total income of Rs.9,48,36,690/- after claiming deduction under Section 10B of the Act to the extent of Rs.9,48,24,379/-. The assessee for the Assessment Year 2010-11 declared total income of Rs.13,55,94,570/- after claiming deduction under Section 10B of the Act to the tune of Rs.8,79,18,006/-. The return was selected for scrutiny. The Assessing Officer by orders dated 23.12.2011 and 27.02.2013 passed under Section 143(3) of the Act for Assessment Years 2009-10 and 2010-11 respectively completed the assessment and disallowed the portion of the claim made under Section 10B of the Act to the extent of Rs.57,40,758/- and Rs.39,27,202/- for Assessment Years 2009-10 and 2010-11. 3. The assessee thereupon filed appeals before the Commissioner of Income Tax (Appeals) who by an order dated 26.03.2013 and 28.08.2014 respectively confirmed the disallowance made under Section 10B of the Act. The assessee thereupon filed an appeal before

5 the Income Tax Appellate Tribunal (hereinafter referred to as 'the tribunal' for short). The tribunal by a common order dated 15.03.2017 dismissed the appeal filed by the assessee. In the aforesaid factual background, this appeal has been filed. 4. Learned Senior counsel for the assessee submitted that substantial questions of law involved in this appeal are covered by decision of this court in 'PCIT VS. INTERNATIONAL STONES INDIA (P.) LTD.', 95 TAXMANN.COM 287 (KAR). It is further submitted that similar view was taken by another division bench in 'METAL CLOSURES (P.) LTD. VS. DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 12(1), BANGALORE', (2019) 102 TAXMANN.COM 71 (KAR). It is also submitted that export made by an assessee even through a third party remains a deemed export in the hands of the assessee and the assessee is entitled to deduction under Section 10B of the Act. It is also urged that the fact that assessee has exported the

6 goods through a third party is not disputed by the revenue. On the other hand, learned counsel for the revenue submitted that the matter deserves to be remitted to the Assessing Officer to enable him to examine whether the assessee has complied with the conditions prescribed under Section 10B of the Act. 5. We have considered the submissions made by learned counsel for the parties and have perused the record. The fact that the assessee has exported the goods through third party is not disputed. The substantial questions of law Nos.1 and 2 have already been answered by two division benches of this court in INTERNATIONAL STONES INDIA (P.) LTD and 'METAL CLOSURES (P.) LTD. For the reasons assigned in the aforesaid decisions, the aforesaid substantial questions of law are answered in favour of the assessee and against the revenue. The tribunal while passing the impugned order has not taken note of decision of this court in 'TATA ELXSI VS. ACIT', 127 DTR 227 and

7 therefore, the substantial question of law No.3 is answered in the affirmative. In the result, the common order passed by the tribunal dated 15.03.2017 in respect of Assessment Years 2009-10 and 2010-11 insofar as it pertains to the findings on substantial question of law Nos.1 and 2 are hereby quashed. In the result, the appeal is allowed. Sd/- JUDGE Sd/- JUDGE ss