1977 (6) TMI 86 - HC - VAT and Sales Tax

Summary

Issues:
1. Whether the commission allowed by the assessee to buyers should be excluded from the taxable turnover for Central sales tax assessment.
2. Whether the commission should be considered a trade discount for the purpose of computation of taxable turnover.

Analysis:

1. The primary issue in this tax revision case before the Kerala High Court was whether the amount of commission allowed by the assessee-company to buyers should be excluded from the taxable turnover for the assessment of Central sales tax. The assessee, a company engaged in the manufacture and sale of rayon yarns, had deducted a specific amount labeled as "commission" from the sales invoices issued to purchasers. The Sales Tax Officer contended that only cash discounts could be considered for deduction in the taxable turnover, not trade discounts like the commission in question. This view was upheld by the Appellate Assistant Commissioner. However, the Kerala Sales Tax Appellate Tribunal, in a majority decision, deemed the commission as a trade discount and directed the exclusion of the commission amount from the taxable turnover of the assessee.

2. The second point raised in the revision petition was whether the commission should be classified as a trade discount for the purpose of computing the taxable turnover. The Tribunal found that the company consistently deducted a percentage of commission from the gross price in the invoices, resulting in a net price payable by buyers. The Court referred to a previous decision where it was held that amounts allowed as trade commission or discount should not be added to the turnover for Central sales tax assessment. The Court agreed with this precedent and affirmed the Tribunal's decision to exclude the commission amount from the taxable turnover of the assessee for the relevant assessment year.

In conclusion, the Kerala High Court dismissed the tax revision case and upheld the Tribunal's decision to exclude the commission amount from the taxable turnover of the assessee-company for the assessment year. The Court directed each party to bear their respective costs, thereby settling the dispute in favor of the assessee.