Commission to selling agents is not a deductible discount where no outright sale to the vendors is shown.

Commission paid to street vendors under a sale-on-commission arrangement was held not to qualify as a deductible discount. The vendors were treated as selling agents, not buyers, because goods were handed over for resale, unsold stock was returned, and accounts were settled on that basis. Under explanation (2)(iii) of section 2(r) of the Tamil Nadu General Sales Tax Act and rule 5-A of the Tamil Nadu General Sales Tax Rules, only a discount allowed by the seller to the buyer on an outright sale can be excluded from turnover. The deduction claim was rejected and the assessment was upheld.

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Issues: Whether the commission paid to street vendors could be treated as a deductible discount so as to exclude the disputed turnover from assessment.

Analysis: The vendors were found to be persons engaged by the assessee for selling the goods and not purchasers who bought the goods outright. The goods were handed over for sale on commission basis, unsold goods were taken back, and accounts were settled on that footing. Under explanation (2)(iii) of section 2(r) of the Tamil Nadu General Sales Tax Act and rule 5-A of the Tamil Nadu General Sales Tax Rules, only a discount allowed by the seller to the buyer on the sale price can be excluded from turnover. Since no sale to the vendors was established and no discount was allowed to the actual consumers, the commission paid to the vendors could not be characterised as a discount.

Conclusion: The claim for deduction of the vendors' commission as discount was rejected and the assessment was upheld.

Ratio Decidendi: A commission paid to selling agents or vendors on a sale-on-commission arrangement is not a deductible discount unless it is shown to be a discount allowed by the seller to the buyer on an outright sale.

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