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Post-sale discounts can be deducted from taxable turnover

In M/s Maya Appliances (P) Ltd now known as Preethi Kitchen Appliances Pvt. Ltd. vs Addl. Commissioner of Commercial Taxes & Ors, the appellant, a manufacturer of mixies, grinders etc, used to follow the practise of offering performance-based quarterly discounts to its distributors. The discounts were calculated on the basis of performance of dealers in the previous quarter. Based on performance, discounts were applied retrospectively to the sale prices of previous quarters.

The Revenue rejected the claim of the appellant for deduction of discount amount from the taxable turnover. The stand of the Revenue was that that the quarterly discount given by the appellant was in respect of the performance of the previous quarter and not in respect of the sales offered under the same invoices.

The Supreme Court referring to Southern Motors v. State of Karnataka (2017) held that the liability to pay tax is on the taxable turnover. Taxable turnover is arrived at after making permissible deductions from the total turnover. Among them are “all amounts allowed as discounts.” Such a discount must, however, be in accord with the regular trade practice of the dealer or the contract or agreement entered into in a particular case and therefore all trade discounts are allowable as permissible deduction.

The appeal was allowed, permitting deduction of discounts from turnover.

 Article referred: http://www.livelaw.in/post-sale-discounts-can-deducted-taxable-turnover-supreme-court-read-judgment/

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