Trade discount deduction under VAT law allowed when supported by accounts and contemporaneous records, even if shown in a later invoice.

Trade discount granted through a subsequent invoice was deductible in computing taxable turnover under the Karnataka Value Added Tax Act, 2003 and Rule 3(2)(c) because taxable turnover means net turnover after permissible deductions, and genuine discounts given under regular practice or contractual terms are allowable. The requirement that the invoice or bill of sale show the discount was treated as a mode of proof, not a substantive bar, so the discount need not appear on the original sale invoice if the assessee proves the link to specific sales through accounts and contemporaneous records. The earlier construction in Southern Motors was followed, and the contrary view was rejected.

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Issues: Whether trade discount granted in a subsequent invoice on the basis of quarterly dealer performance is deductible in computing taxable turnover under the Karnataka Value Added Tax Act, 2003 and Rule 3(2)(c) of the Karnataka Value Added Tax Rules, 2005.

Analysis: Taxable turnover is the net turnover after permissible deductions from total turnover, and the Act allows deduction of all amounts allowed as discount. Rule 3(2)(c) recognises discounts given in accordance with regular practice or contractual terms, and the requirement that the invoice or bill of sale show the discount is a mode of ascertainment, not a substantive restriction that defeats genuine trade discounts. The discount need not necessarily appear on the original sale invoice if the assessee establishes from its accounts and contemporaneous records that the discount relates specifically to the relevant sales. The construction placed earlier on the same rule in Southern Motors was followed, and the contrary view of the High Court was held unsustainable.

Conclusion: The trade discount was allowable as a deduction, subject to proof in the accounts and contemporaneous records, and the disallowance was set aside.

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