Thursday, February 22, 2018

All discounts in normal trade practices are allowed as deduction in computing taxable turnover - Supreme Court

All trade discounts are allowed as deduction while computing taxable turnover if such discounts are given in normal course of business- Supreme Court.
In Maya Appliances P Ltd Case Supreme Court has clarified that assessee is allowed deduction of all trade discounts whether on targets or quantity for computing the taxable turnover.

The  Maya Appliances P Ltd had allowed discounts on quarterly basis to its dealers on the basis of turnover targets done by them and gave discounts in next quarter in sale invoices for the earlier quarter sales turnover and calculated the turnover after such discounts.

The Commercial Tax Department disallowed the quarterly discount given to its dealers on the plea that the discount was not directly related to the sales invoices raised in relevant quarter. The Company filed an appeal and was allowed in favour of Assessee Company but fighting with revenue at all stages went to Supreme Court.

The Supreme Court held that all trade discounts given following normal trade practices are allowed as deduction  while computing taxable turnover. So, all trade discounts were permissible deductions in case of Maya Appliances P Ltd and the appeal allowed in favor of Assessee Company.