By C. B. Thakar Advocate; G. G. Goyal, Janak Vaghani Chartered Accountants
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Sales Tax – Turnover of Sales – Trade Discount – Given Subsequently – By Credit Notes – Deductible, Section 2 (xxvii) of The Kerala General Sales Tax Act, 1963 and R 9(a) of The Kerala General Sales Tax Rules, 1963.
FACTS
The appellant Company is a manufacturer of home appliances. The company as a part of Sales Promotion Scheme allowed discount to its dealers on achieving pre-set sale targets subsequent to issue of sales invoices by way of credit notes. The Company claimed deduction of such trade discount from turnover of sales. The assessing authority principally accepted the claim but there was a dispute in the computation thereof. The matter was disputed up to the High Court. The Kerala High Court held that discount in question was not a trade discount at all and it was not eligible for deduction in terms of Rule 9(a) of the Rules. The appellant company filed appeal before the SC.
HELD
The definition of the term “turnover” contained in section 2(xxvii) read with Explanation (2)(ii) to it recognises discounts other than cash discounts and provides that those other discounts like the cash discount shall not be included in the turnover. Further, Rule 9(a) stipulates that the accounts should show that the purchaser has paid only the sum originally charged less discount. There is nothing in Rule 9(a) to read it in a restrictive manner to mean that a discount in order to qualify for exemption under its provisions must be shown in the invoice itself. Accordingly, the SC allowed the appeal and remanded the matter back to the assessing authority to pass fresh orders in light of the judgment of the SC.
