JUDGMENT 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 cases raise similar questions.
2. The Additional Judge (Revisions) Sales Tax, Agra, has submitted the statement of the case for the opinion of this court on the following two questions of law :-
(1) Whether, under the facts and circumstances of these cases, annuity payments 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 ?
3. 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 totalling a sum of Rs. 200 and up to Rs. 500 he was to be given an annuity at the rate of 2½ per cent, of the sale price. The rate of annuity gradually increased, the maximum was 10 ½ 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.
4. 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 y,ear 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 are 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.
5. 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 the year is closed. It has also been emphasized that the assessee does not call the payment a discount and that that was also relevant.
6. Under the U.P. Sales Tax Act, sales tax is payable by a dealer on his turnover. The term "turnover" has been denned 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.
7. The question is whether this annuity was a cash discount within the meaning of Sub-clause (ii) of the second explanation aforesaid. It will be seen that the provision is general. A deductible discount can be in cash or even in kind, provided it is allowed on the sale price. The provision does not require the discount to be paid out immediately the price is paid. The motive of the dealer in giving a discount to a customer has not been denned. The Legislature considered it immaterial as to what impels a dealer to pay a discount to a customer. Whatever be the reason motivating a dealer to pay a discount, it would be deductible provided it is paid on the sale price. It is thus immaterial whether a dealer pays something to a customer as an inducement for prompt payment of the sale price or with a view to push up his own sales or with a view to get the better of his competitors in the trade. In our opinion, the Additional Judge (Revisions) Sales Tax was in error in emphasizing that the assessee was paying the annuity as a kind of reward to the customers to make heavy purchases. He was also in error in holding that, since the annuity was paid not immediately the price is paid, but at the end of the year, it is not a permissible deduction. The provision does not limit its applicability to only such cases where the discount is paid at the time of the payment of the price. The only condition before a payment can be excluded from the turnover is that it should be a payment in cash or kind and that it must be allowed on the price of any sale. The term "any sale" would not, in our opinion, mean an individual sale. It will include any aggregate of sales. If a particular purchaser buys half a dozen things, the dealer would normally make out a single cash memo and he would give the discount on the total value of the sales. If the argument for the department is taken to its logical conclusion, such a consolidated cash discount would not be deductible, simply because the dealer has given the discount not on the sale of each article separately, but had clubbed together the various sales and paid the discount on all of them.
8. The second sub-clause of the explanation does not concern itself either with the motive which impels a dealer to pay a discount or the manner and method of payment adopted by a particular dealer. A dealer may grant a discount only to such a customer who patronises him regularly. He may adopt a scheme that he would pay a discount to only those customers as have visited his shop at least a dozen times in a month. Such a scheme would not take the payment of such discount outside the purview of this sub-clause. Similarly, the scheme announced by the assessee for paying cash, but calling it annuity, on the basis of annual purchases made by a customer or agent, was also permissible because it was payment in cash made on the sale price given by a particular customer or agent in the course of a whole year. The rate of payment was related to the sale price. It was hence clearly within the ambit of Sub-clause (ii) of the explanation. It was a cash discount on the price allowed in respect of sales and was liable to be excluded from the assessee's turnover. The first question is answered in the affirmative in favour of the assessee.
9. Though the Additional Judge (Revisions) Sales Tax has framed the second question in order to have the opinion of this court on the problem whether there is any difference between the Central and U.P. Sales Tax Acts in this regard, it is curious that the provisions of the Central Act have not even been noticed or mentioned in the order disposing of the revision. In fact, neither the Sales Tax Officer, nor the Assistant Commissioner or the Additional Judge (Revisions) Sales Tax has adverted to the provisions of the Central Act at all. Two references relate to the Central Act. In order to answer the question it is necessary to refer to the provisions of the Central Act. Clause (j) of Section 2 of the Central Act defines the term "turnover" to mean the aggregate of the sale prices received or receivable by the dealer in respect of sales of any goods in the course of inter-State trade or commerce. Clause (h) defines the term "sale price" to mean "the amount payable to a dealer as consideration for the sale of any goods, less any sum allowed as cash discount according to the practice normally prevailing in the trade...". In the Central Act "cash discount according to the practice normally prevailing in the trade" alone is deductible. In the U.P. Act, "any cash or any other discount on the price allowed in respect of any sale" was liable to be excluded from the turnover. The Central Act differs frorriithe U.P. Act in two essential particulars. Unlike the U.P. Act, the Central Act does not allow payment of discount in kind ; the permissible discount must be in cash. The Central Act, further, limits the allowable discount in another respect. It must be paid according to the practice normally prevailing in the trade. There is no such condition under the U.P. Act.
10. For the assessee it was urged that the word "trade" occurring in the phrase "according to the practice normally prevailing in the trade" refers to the trade carried ori" by the particular assessee. It is difficult to accept this submission. If the Parliament had in view the trade of a particular assessee the phrase would have been "according to the practice normally followed by the dealer". The Parliament has used the word "dealer" in the definition of the "sale price" in the beginning and there was no difficulty in repeating the word. But, we find that Parliament has couched the condition in general terms. The phrase "prevailing in the trade" would rather point to the various similar businesses constituting the trade in a particular commodity, rather than to the activity of the individual dealer alone. It appears to us that the cash discount to be deductible has to be according to the practice normally prevailing in the trade, that is to say, in similar other businesses. A practice adopted by any individual dealer would not be enough, unless, of course, it be found that the assessee was the only businessman in the particular commodity. In that event, he himself would constitute the trade.
11. It has been seen that neither of the authorities below applied their mind to the provisions of the Central Act. They have not recorded the requisite findings on the various factual aspects of the matter. It is apparent that the Central Act differs in the matter of allowable discount from the U.P. Act, but the effect of that difference cannot be adjudged at this stage because the material and relevant facts have not been found. The effect will have to be adjudged by the authorities below after they have found the facts.
12. We answer the question as follows :
There is a material difference in the matter of allowable discount between the Central and the U.P. Sales Tax Acts. Its effect will depend on the findings on the various factual aspects of the matter.
13. The assessee will be entitled to two sets of costs, which are assessed at Rs. 100 (rupees one hundred) each. The counsel's fee is assessed at the same figure.