Trade discount by free goods allotment upheld for manufactured goods, but promotion goods cost remained includible in assessable value.

Free allotment of goods manufactured by the assessee to dealers was treated as admissible trade discount under section 4 because the discount was supported by circulars and chartered accountant's certificates and was granted uniformly, making it a quantity discount in kind. By contrast, the cost of goods not manufactured by the assessee, including cosmetics and similar items given as sales-promotion incentives, was not excludible from assessable value. The broader objection relating to damaged-display goods did not defeat the manufactured-goods discount, but the exclusion for non-manufactured goods was sustained.

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Issues: Whether free allotment of goods given to dealers as discount was admissible as trade discount under section 4, and whether the cost of other goods such as cosmetics was excludible from assessable value.

Analysis: The discounts on the assessee's own manufactured goods were supported by the circulars and chartered accountant's certificates and were given uniformly to dealers, so they constituted quantity discount in kind. Discounts for goods not manufactured by the assessee, such as cosmetics and similar items, were treated as sale promotion incentives and not deductible from assessable value. The Commissioner's broader objection based on damaged-display goods was not accepted for the manufactured goods discount, while the exclusion of non-manufactured goods was sustained.

Conclusion: The discount by free allotment of goods manufactured by the assessee was admissible under section 4, but the cost of other goods was not entitled to reduction; the appeal succeeded only to that extent.

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