Deductible sales discount principle: lump-sum or aggregate payment discounts can still reduce turnover when tied to the sales transaction.

A purchaser's discount was held deductible from turnover under clause (iii) of Explanation (2) to section 2(r) of the Madras General Sales Tax Act, 1959. The court treated the discount as part of the sales transaction between vendor and purchaser and held that its character as a deductible discount was not lost because it was granted in a lump sum or by reference to aggregate payments rather than against each individual sale. The form of allowance did not change its substance. The deduction was therefore allowed in favour of the assessee.

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Issues: Whether the discount allowed to the purchaser was deductible from turnover under clause (iii) of Explanation (2) to clause (r) of Section 2 of the Madras General Sales Tax Act, 1959.

Analysis: The discount was treated as falling within the statutory definition of deductible discount. Its character was linked to the sales transaction between vendor and purchaser, and it did not lose that character merely because it was allowed in a lump sum or by reference to aggregate payments rather than separately against each sale. The form of allowance did not alter its substance as a discount connected with the sales.

Conclusion: The discount was deductible from turnover. The issue was decided in favour of the assessee and against the revenue.

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