Tax deducted at source under KVAT is deductible from taxable turnover where collected as tax under the Rules.

Under the Karnataka Value Added Tax regime, tax deducted at source collected by a Government department was treated as an amount collected by way of tax and therefore deductible from taxable turnover. Rule 3(2)(h) of the Karnataka Value Added Tax Rules, 2005 permits deduction of all such tax amounts from total turnover, and the Court followed its earlier decision on the same point. The revisional view refusing the deduction was held unsustainable, and the issue was answered in favour of the assessee and against the revenue.

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Issues: Whether tax deducted at source collected by a Government department is deductible from the taxable turnover under the Karnataka Value Added Tax regime.

Analysis: Rule 3(2)(h) of the Karnataka Value Added Tax Rules, 2005 allows deduction of all amounts collected by way of tax under the Act from the total turnover. The Court followed the earlier decision on the same point and held that tax deducted at source under the Act is an amount collected by way of tax and therefore cannot be added to the taxable turnover. The revisional view rejecting the deduction was found unsustainable.

Conclusion: The issue was answered in favour of the assessee and against the revenue.

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