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TMI Blog1983 (2) TMI 251X X X X Extracts X X X X X X X X Extracts X X X X ..... e of goods returned by the purchasers could be deducted under rule 9(b)(i) of the Rules from the total turnover of the year of assessment in which the goods were actually returned when they had been sold in the previous assessment year. The assessee, M/s. Motor Industries Co., Ernakulam, is a dealer in diesel fuel injection parts, etc. For the assessment year 1973-74 ending 31st March, 1974, the assessment had been completed under the Act on the best judgment basis determining the taxable turnover at Rs. 47,42,687.71 by disallowing the claim for exemption of an amount of Rs. 69,707.68 which the assessee had claimed as "service discount" under rule 9(a) of the Rules and a further amount of Rs. 982.83 under rule 9(b)(i) of the Rules being the value of goods returned. The Assistant Commissioner of Sales Tax (Assessment) who was the assessing authority disallowed the claim in respect of "service discount" on the ground that the amount in respect of which deduction was claimed had not been allowed as a discount in accordance with the terms of sale but had been allowed as an overriding commission and "incentive" to promote trade. He disallowed the claim in respect of the value of goods ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dealer when the goods are taxable on the amount for which they had been sold provided that the accounts show the date on which the goods were returned and the date on which and the amount for which refund was made or credit was allowed to the purchaser" We shall first deal with the claim made in respect of "service discount". Under clause (a) of rule 9 of the Rules all amounts allowed as discount where such discount is allowed in accordance with the regular practice of the dealer or is in accordance with the terms of contract or agreement entered into in a particular case have to be deducted from the total turnover in determining the taxable turnover provided the accounts of the assessee show that the purchaser has paid only the sum originally charged less the discount. In the instant case the "service discount" in respect of which the deduction was claimed by the assessee was the additional trade discount allowed by it to its main distributors (purchasers), namely, the T.V.S. group of companies, which constitute a prestigious group of commercial concerns over and above the normal trade discount in consideration of the extra benefit derived by the assessee by reason of the market ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion that the "service discount" in question is in the nature of a set-off on account of reciprocal promises or amounts to consideration for an agreement styled as "trading-in". "Trade-in" contracts are those where goods are transferred by the seller for consideration partly in money and partly in exchange of some other goods to be sold by the buyer to the seller. In such cases there may be one contract of sale only of the principal goods coupled with a subsidiary agreement that if the buyer delivers to the seller the other goods, an agreed allowance will be made. There may also be cases where the buyer may become entitled to an extra allowance for some service unconnected with the sale of the goods in question being rendered to the seller. In such cases the allowance in the price of the goods sold given by the seller to the buyer either by way of consideration for the goods supplied by the buyer to the seller or for services rendered by the buyer to the seller would not be a trade discount as such which would qualify for deduction in the determination of the taxable turnover. In the instant case the service said to have been rendered by the buyers for securing the "service discoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the illustration of a dealer who ceases to be a dealer in the subsequent financial year. In his case unless deduction is allowed in the financial year in which the goods that are subsequently returned were actually sold, he would have to pay tax on the amount for which the goods in question were sold in the assessment year in which they were sold and he would not be able to claim any deduction in the subsequent year as he has ceased to be a dealer in that year. There may also be difference in the tax liability if the rates of tax are varied in the subsequent assessment year. Further by such deduction the turnover relating to the subsequent financial year which is otherwise taxable under the statute would escape taxation to the extent of the deduction. Such a result cannot be permitted to ensue. It is true that in the case of many sales which have taken place in the months of January, February and March in any financial year, the assessee would become aware of his right to claim the deduction under rule 9(b)(i) in his return pertaining to that assessment year during the subsequent financial year if such goods are returned within three months of the date of delivery. It is quite p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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