Turnover deduction for returned goods upheld where sale price was refunded, despite contractual wording describing the arrangement as repurchase.

Goods returned by the purchaser within the prescribed period were deductible from turnover where the sale price had been refunded or adjusted, because the statutory test focused on the substance of the transaction, not the label used in the distributorship agreement. A contractual description of the arrangement as a repurchase did not prevent the dealer from treating the goods as returned after an earlier sale, so long as the goods had been included in turnover and were in fact taken back within time. The Bombay HC held that the assessee was entitled to the deduction under both the Bombay Sales Tax Act, 1959 and the Central Sales Tax Act, 1956, and that the Tribunal erred in disallowing the claim.

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Issues: Whether the assessee was entitled to deduct from turnover the sale price refunded on goods returned by the purchaser under the Bombay Sales Tax Act, 1959 and the Central Sales Tax Act, 1956, when the transaction was described as a repurchase under the distributorship agreement.

Analysis: The relevant deduction provisions applied where goods had first been sold, included in turnover, and thereafter returned by the purchaser within the prescribed period with refund or adjustment of the sale price. The form of description used by the parties did not control the legal character of the transaction. A return of goods within the statutory period necessarily follows a prior sale and, in substance, amounts to the dealer taking back goods earlier sold. The statutory language under both enactments was materially similar, and the fact that the agreement required repurchase at the original price did not deprive the assessee of the deduction where the goods were in fact returned within time and the price was refunded.

Conclusion: The assessee was entitled to the deduction under both enactments, and the Tribunal was in disallowing the claim on the footing that the transaction was a repurchase rather than a return of goods.

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