Trade discounts and sales-linked incentives are not promotional service consideration where dealer and manufacturer act on a principal-to-principal basis.

Sales-linked incentives received by an authorised dealer from a car manufacturer under a principal-to-principal arrangement were treated as trade discounts or commercial schemes, not as consideration for independent promotional or marketing services. The nomenclature used in the accounts was held to be irrelevant, because the real character of the transaction was the sale of goods and normal dealership practice. On that basis, the incentives did not fall within Business Auxiliary Service and were not taxable as service consideration.

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Issues: Whether incentives received by an authorised dealer from the car manufacturer, based on sales volume, are taxable as consideration for promotional activity under Business Auxiliary Service.

Analysis: The relationship between the dealer and the manufacturer was one of principal to principal. The incentives were found to be trade discounts or schemes linked to the sale of vehicles and spares, not consideration for any independent promotional or marketing service. The character of the transaction was sale of goods, and the nomenclature used in the accounts was held to be irrelevant. Since such discounts are a normal feature of dealership trade practice, they do not convert the dealer's sales activity into a taxable service.

Conclusion: The incentives were not taxable as Business Auxiliary Service and the demand could not be sustained.

Ratio Decidendi: Trade discounts or sales-linked incentives received by a dealer under a principal to principal arrangement do not constitute consideration for promotional services and are not taxable as Business Auxiliary Service.

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