Input tax credit cannot be denied where a discount credit note leaves the original tax invoice and tax component unchanged.

Input tax credit could not be denied to the purchasing dealer merely because the selling dealer later issued a credit note for discount, where the tax component in the original tax invoice remained unchanged. Under the Tamil Nadu Value Added Tax Act, discounts are excluded from turnover and Rule 10(6)(b)ii(C) permits credit notes for discount or sales incentives without disturbing the original tax element. As tax had already been paid on the original purchase price, the assessing authority's refusal to allow input tax credit was contrary to the statutory framework, and the assessment order was unsustainable.

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Issues: Whether input tax credit could be denied to the purchasing dealer merely because the selling dealer later issued a credit note for discount, while the tax component on the original tax invoice remained undisturbed.

Analysis: The statutory scheme under the Tamil Nadu Value Added Tax Act, 2006 excludes discounts from turnover, and Rule 10(6)(b)ii(C) of the Tamil Nadu Value Added Tax Rules, 2006 specifically permits credit notes for discount or sales incentives without disturbing the tax component in the original tax invoice. Since the selling dealer had already paid tax on the original purchase price and that tax was not altered, the assessing authority's view that the buyer could not claim input tax credit on the original purchase price was contrary to the statutory framework.

Conclusion: The denial of input tax credit was unsustainable and the impugned assessment order was liable to be set aside in favour of the assessee.

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