TMI Blog1973 (7) TMI 95X X X X Extracts X X X X X X X X Extracts X X X X ..... from the taxable turnover. The learned counsel for the assessee contends that the assessee is maintaining its books of account on a mercantile basis, that the amount allowed as discount to each of the distributors is credited to their accounts at the end of the year and that such crediting is as good as cash payment. It is urged that the amount given as discount actually goes to reduce the sale price payable by the distributors, that it never forms part of the consideration of the sale and that, therefore, it is only the net amount after deducting the said discounts that can be taken to be the taxable turnover. The learned counsel placed before us the details of the discount scheme that was effective during the assessment years in question. The scheme itself is called "bonus discount scheme" and the benefit of the scheme is not extended to all the customers but only to the distributors whose net purchases of all the finished products from the assessee exceeds the target figure agreed to between the parties. The bonus discount given under that scheme is called "rebate" and the rebate to be given is subject to certain terms and conditions. The following conditions, namely, conditio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent is determined after the close of the agreed period. It is true that the five per cent bonus discount given by the assessee to the distributors is treated as a credit reserve for making future purchases, but it does not go to reduce the sale price already agreed or paid for during the period nor is it refunded to the distributors. What the learned counsel contends is that, in effect, it amounts to a refund of five per cent of the aggregate sale price paid by the distributor. But the amount of bonus discount credited in the distributor's account can only be utilised for purchase of the articles in future and cannot be received as cash. Therefore, the learned counsel is not right in his submission that the bonus discount credited to the distributors' account can be equated to a cash payment resulting naturally in the deduction of the aggregate of sale prices. We are of the view that the effect of the scheme is to give the distributors who are eligible to the bonus discount under the said scheme goods worth five per cent of the total purchases made during the qualifying period free of cost. We are not able to distinguish this scheme from some of the schemes adopted by the dealers a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uotations or published list price, and cash discount normally denotes an amount allowed to customers either for prompt payment of the invoices amount or for payment within a certain period of time. The bonus discount given in these cases cannot, therefore, strictly come under "cash discount". The learned counsel for the assessee refers to the following passage in Brown v. National Provident Institution[1921] 2 A.C. 222 at 251. : "The word 'discount' is in the Oxford English Dictionary defined, in its primary meaning, as an abatement or deduction from the amount, or from the gross reckoning or value of anything, and, as used in commerce (1) is defined to mean a deduction (usually at a certain rate per cent) made for payment before it is due of a bill or account; or any deduction or abatement from the nominal value or price; (2) 'the deduction made from the amount of a bill of exchange or promissory note by one who gives value for it before it is due'" and also to the decision in Wellsted's Will Trustees, In re: Wellsted v. Hanson[1949] Ch. 296., to illustrate as to how the word "cash" occurring in the expression "cash discount" is to be understood. Lord Greene, M.R., had expre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the fact that the rebate was given by way of credit notes showed that the sale price was still the original contract price and the obligation on the part of the purchasers to pay the contract price still remained, that the arrangement under which the rebate was given was in substance and effect to induce the purchasers to take delivery of the goods by offering a remission, and that the question of remission will arise only after the contracts are performed, that is, after the goods were delivered and accepted and invoice price as per the original contract paid by the purchasers. Section 2(14) of the Bombay Sales Tax Act, 1953, which was considered in that case is practically on the same lines as section 2(h) of the Central Sales Tax Act, and deduction is allowed only for a cash discount given according to the trade practice. While rejecting the contention put forward on behalf of the assessees that the sale price that would be relevant for the purpose of determining the turnover of the assessees would be the price actually received by the assessees and not the price agreed to under the contracts, the learned Judges expressed: "Under section 2(20), turnover means the aggrega ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al as to what impels 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. The provision does not limit its applicability to only such cases where the discount is paid at the time of the payment of the price. The only condition before a payment can be excluded from the turnover is that it should be a payment in cash or kind, and that it must be allowed on the price of any sale. The term 'any sale' would not, in our opinion, mean an individual sale. It will include any aggregate of sales." As the ann ..... X X X X Extracts X X X X X X X X Extracts X X X X
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