TMI Blog1970 (1) TMI 67X X X X Extracts X X X X X X X X Extracts X X X X ..... on the following two questions of law: "(1) Whether, under the facts and circumstances of these cases, annuity payments made by the assessee to its customers or agents can be allowed as deductions from the net turnover of the assessee in respect of the concerned years? (2) Whether there is any difference in this matter between the Central and U.P. Sales Tax Acts, and if so, to what effect?" Messrs Shri Baidyanath Ayurved Bhawan (Private) Limited, Jhansi, is a manufacturer of medicines at Jhansi. In its price-list the assessee had announced the payment of annuity to its customers and agents who purchased the assessee's medicines. The scheme was that for purchases below Rs. 200 in a year no annuity was allowed. If a customer or agent purc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he annuity was granted on the total sales for the year, and was undetermined until the year had actually closed. It was not the kind of trade discount usually allowed on each transaction. He held that a discount is generally allowed on a fixed rate on each transaction as an inducement for prompt payment. In the present case the so-called discount is not even called as a discount by the assessee. He calls it annuity which discloses its nature better. The rate of annuity is fluctuating. Such annuity payments are ex-gratia payments, made by the assessee as a kind of reward for making heavy purchases, and are essentially different from trade discounts, which are deducted immediately from the price paid, as a reward for prompt payment and did no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ls a dealer to pay a discount to a customer. Whatever be the reason motivating a dealer to pay a discount, it would be deductible provided it is paid on the sale price. It is thus immaterial whether a dealer pays something to a customer as an inducement for prompt payment of the sale price or with a view to push up his own sales or with a view to get the better of his competitors in the trade. In our opinion, the Additional Judge (Revisions) Sales Tax was in error in emphasizing that the assessee was paying the annuity as a kind of reward to the customers to make heavy purchases. He was also in error in holding that, since the annuity was paid not immediately the price is paid, but at the end of the year, it is not a permissible deduction. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e basis of annual purchases made by a customer or agent, was also permissible because it was payment in cash made on the sale price given by a particular customer or agent in the course of a whole year. The rate of payment was related to the sale price. It was hence clearly within the ambit of sub-clause (ii) of the explanation. It was a cash discount on the price allowed in respect of sales, and was liable to be excluded from the assessee's turnover. The first question is answered in the affirmative in favour of the assessee. Though the Additional Judge (Revisions) Sales Tax has framed the second question in order to have the opinion of this court on the problem whether there is any difference between the Central and U.P. Sales Tax Acts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... prevailing in the trade. There is no such condition under the U.P. Act. For the assessee it was urged that the word "trade" occurring in the phrase "according to the practice normally prevailing in the trade" refers to the trade carried on by the particular assessee. It is difficult to accept this submission. If the Parliament had in view the trade of a particular assessee the phrase would have been "according to the practice normally followed by the dealer". The Parliament has used the word "dealer" in the definition of the "sale price" in the beginning, and there was no difficulty in repeating the word. But, we find that Parliament has couched the condition in general terms. The phrase "prevailing in the trade" would rather point to th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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