Canteen sales exemption and sales-return deduction applied where statutory obligation and actual return of goods were proved.

Canteen sales were held exempt where the canteen was run by the employer under a statutory obligation, operated without profit motive, and the employer subsidised at least 25% of total expenses; the exemption was not limited to co-operative employee-run canteens. Sales-return deduction was also allowed in the year the goods were actually returned, even if the original sales had occurred in an earlier assessment year. On the merits, both disputed additions were sustained in favour of the assessee, although the revision petition was dismissed with costs.

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Issues: (i) Whether turnover from canteen sales was exempt under the Government order where the canteen was run by the employer under a statutory obligation without profit-motive and the employer subsidised at least 25 per cent of the total expenses. (ii) Whether the assessee was entitled to deduction of the amount representing sales return in the assessment year in which the goods were returned, even though some of the original sales related to the previous year.

Issue (i): Whether turnover from canteen sales was exempt under the Government order where the canteen was run by the employer under a statutory obligation without profit-motive and the employer subsidised at least 25 per cent of the total expenses.

Analysis: The exemption language was not confined to canteens run by employees on a co-operative basis. It extended to all canteens run by an employer, or by employees on a co-operative basis on behalf of the employer, if the canteen was maintained under a statutory obligation without profit-motive and the employer met at least 25 per cent of the total expenses. On the figures available, the required subsidy condition was satisfied.

Conclusion: The canteen sales were entitled to exemption, though on a ground different from that adopted by the Tribunal.

Issue (ii): Whether the assessee was entitled to deduction of the amount representing sales return in the assessment year in which the goods were returned, even though some of the original sales related to the previous year.

Analysis: The material produced was sufficient to establish that the amount represented sales return. The relevant principle was that deduction is allowable in the year in which the goods are returned, even if the original sale occurred in an earlier assessment year.

Conclusion: The deduction for sales return was allowable in the assessment year 1965-66.

Final Conclusion: Both disputed additions were sustained in favour of the assessee on the merits, but the revision petition failed as a whole and stood dismissed with costs.

Ratio Decidendi: An exemption notification covering canteen sales applies to employer-run canteens maintained under statutory obligation without profit-motive if the employer subsidises the prescribed share of expenses, and sales-return deduction is allowable in the year the goods are actually returned.

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