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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 ..... ---------------------------------------- The judgment of the Court was delivered by VENKATARAMIAH, J.- In this appeal by special leave arising under the Kerala General Sales Tax Act, 1963 (hereinafter referred to as "the Act"), two questions arise for consideration. They are (i) whether on the facts and in the circumstances of the case the Appellate Tribunal was justified in law in holding that the assessee was entitled to exemption under rule 9(a) of the Kerala General Sales Tax Rules, 1963 (hereinafter referred to as "the Rules"), from payment of sales tax on the turnover relating to "service discount" and (ii) whether the value 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 f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ver, the amounts specified in the following clauses, shall subject to the conditions specified therein, be deducted from the total turnover of the dealer: (a) all amounts allowed as discount, provided that such discount is allowed in accordance with the regular practice of the dealer or is in accordance with the terms of a contract or agreement entered into in a particular case and provided also that the accounts show that the purchaser has paid only the sum originally charged less the discount; (b)(i) all amounts allowed to purchasers in respect of goods returned by them within a period of 3 months from the date of delivery of the goods to the 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 agre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n similar goods would also improve. Hence any concession in price shown in such circumstances by way of an additional incentive with a view to promote one's own trade does qualify for deduction as a trade discount. It cannot be termed as a service charge as is attempted to be termed in this case. In fact in this case apart from buying the products of the assessee, no other service is being rendered by the T.V.S. group of companies to the assessee. In the circumstances the additional discount or "service discount" as it is called in this case is no other than the discount referred to in rule 9(a) of the Rules. We are not inclined to accept the submission 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s always made in respect of one year, i.e., the financial year which commences on April 1 of every calendar year and ends with March 31 of the succeeding calendar year. That is clear from the scheme of section 5 of the Act and rules 11, 18, 20 and other rules found in the Rules. Any deduction that can be made under rule 9(b)(i) of the Rules can only be made from the total turnover of the assessment year in which the goods that are returned within three months of the date of delivery were actually sold. Such deduction cannot be claimed from the total turnover of the succeeding financial year. The reason is obvious and it can be easily demonstrated by taking 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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