In the case of Serum Institute of India Ltd. [1] (Taxpayer), the Taxpayer had made supplies of vaccines to UNICEF[2] , where delivery was made in India for domestic consumption. In this regard, the issue before the Pune Income Tax Appellate Tribunal (Tribunal) was whether the same would be eligible for export benefits under Section (S.) 10AA of the Income Tax Act, 1961 (ITA), where proceeds for such supply have been earned in foreign currency.
The relevant provision of law (viz., S.10AA of the ITA) grants a deduction in respect of profits earned from export of goods outside India. In this respect, the comparable provisions of the regulatory and indirect tax laws treat such supplies within India as “deemed exports” and grant benefits thereunder. Against this backdrop, the issue before the Tribunal was whether such benefit under regulatory and indirect tax laws could also be extended to S.10AA of the ITA.
In this respect, the Tribunal noted that S.10AA of the ITA was inserted vide the regulatory and indirect tax laws and, accordingly, the legislative intent thereof to provide benefit for such deemed exports would equally apply to S.10AA of the ITA. In doing so, the Tribunal rejected the tax authority’s argument that there was no export since the supply was within India and hence, deduction under the ITA under S.10AA should be denied. The Tribunal held that the requirement to supply goods outside India (export) and then re-import the same would be an empty formality and meaningless ritual.
Accordingly, the Tribunal held that benefit of deduction under S.10AA of the ITA cannot be denied to the Taxpayer merely on the grounds that goods were not exported outside India, even though the consideration was received in foreign currency.
