Income tax on discount

[ranjit ronald]

Dt.3.10.2009 Sir, We have appointed A as our stockists. We have sold our products to B through our stockists A. Payment by cheque is received from B and credited to A's a/c (stockists). Invoice is raised and goods dispatched to B (consignee) on account of A stockists. In the sales ledger all the traansactions done through the account of A, the stockists. In the sales ledger there is no transactions of B the consignee. At the month end we are allowing Trade discount to A (stockist) on the basis on total offtake. The discount is credited to A's a/c (stockists) through credit note. In the sales tax monthly return the above transactions are recorded as sales to A (stockist) . Pl advice : 1. Whether the Discount paid to A attracts income tax. 2. B wants to avail VAT input tax credit against this transaction. Is it possible. If not please give remedial measures. RANJIT RONALD

AI Summary

Trade Discount Taxation: Income Tax and VAT Input Credit Implications for Stockist Transactions with Sections Referenced A company has appointed a stockist, A, to sell products to B, with payments made by B and credited to A's account. The company raises invoices and dispatches goods to B on behalf of A, recording all transactions in A's account. At month-end, a trade discount is credited to A's account, and sales are recorded as transactions with A. The query seeks advice on whether the discount attracts income tax and if B can avail VAT input tax credit. The response suggests that the tax implications depend on how the transactions are recorded and the nature of the sale and purchase.