SATISH CHANDRA, J. - (1.) THESE are four references under section 11(1) of the U.P. Sales Tax Act. They relate to the assessment years 1959-60 and 1960-61. Two references arise out of the proceedings under the U.P. Sales Tax Act whereas the other two relate to proceedings under the Central Sales Tax Act, 1956. All the four case raise similar questions. The Additional Judge (Revisions) Sales Tax, Agra, has submitted the statement of the case for the opinion to this court on the following two questions of law :- "(1) Whether, under the facts and circumstances of these cases, annuity payment made by the assessee to its customers or agents can be allowed as deductions from the net turnover of the assessee in respect of the concerned years ? (2) Whether there is any difference in this matter between the Central and U.P. Sales Tax Acts, and if so, to what effect ?" Messrs Shri Baidyanath Ayurved Bhawan (Private) Limited, Jhansi, is a manufacturer of medicines at Jhansi. In its price-list the assessee had announced the payment of annuity to its customers and agents who purchased the assessee's medicines. The scheme was that for purchases below Rs. 200 in a year no annuity was allowed. If a customer or agent purchased medicines totaling a sum of Rs. 200 and up to Rs. 500 he was to be given an annuity at the rate of 2 1/2 per cent. of the sales price. The rate of annuity gradually increased, the maximum was 10 1/2 per cent. payable to customers or agents who had made purchases totalling a sum of Rs. 25,000 or over, in one year. The assessee claimed that this was a cash discount and was an admissible deduction from the turnover. The Sales Tax Officer rejected the claim. He held that the annuity was not a discount allowed generally to every customer. It was a remuneration given to the assessee's agents for disposing of the manufactured goods in the market. The assessee took the matter in appeal. The Assistant Commissioner upheld the view of the Sales Tax Officer. He observed that, truly speaking, the annuity represented a reward to the agents for making higher sales. It was intended to compensate the agents for their extra efforts to make better and higher sales. It did not represent a commission paid by the dealer in the ordinary course of business.
(2.) THE Judge (Revisions) Sales Tax took the same view and did not accept the assessee's contention. He held that the annuity was a contingent payment, depending on the total purchases by a customer during one complete year. It was a kind of reward or inducement for enthusiastic service by the purchasers or agents and could not be termed "any cash or other discount on the price allowed in respect of any sale". No discount was allowed on any sale. The annuity was granted on the total sales for the year, and was undetermined until the year had actually closed. It was not the kind of trade discount usually allowed on each transaction. He held that a discount is generally allowed on a fixed rate on each transaction as an inducement for prompt payment. In the present case the so-called discount is not even called as a discount by the assessee. He calls it annuity which discloses its nature better. The rate of annuity is fluctuating. Such annuity payments are ex-gratia payments, made by the assessee as a kind of reward for making heavy purchases, and are essentially different from trade discounts, which ar deducted immediately from the price paid, as a reward for prompt payment and did not require waiting for the entire year, to find out the rate of the discount. It will be seen that the Judge (Revisions) Sales Tax took the view that an allowable discount must be one which is paid as an inducement for prompt payment. A discount made in order to induce higher sales was not permissible. Further, a permissible discount should be payable on each transaction immediately the sale takes place and not at a fluctuating rate and after year is close. It has also been emphasized that the assessee does not call the payment a discount and that that was relevant.
(3.) UNDER the U.P. Sales Tax Act, sales tax is payable by a dealer on his turnover. The term "turnover" has been defined in section 2(i) of the Act to mean the aggregate amount for which goods are supplied by way of sale by a dealer. Clause (ii) of its second explanation runs as follows :- "any cash or other discount on the price allowed in respect of any sale ...... shall not be included in the turnover.";