SC quashes Karnataka HC judgment, holds that all trade discounts are allowable as permissible deductions for arriving at taxable turnover; Observes that the words “in respect of the sales relating to such discount” in the expression “the tax invoice or bill of sale issued in respect of the sales relating to such discount shows the amount allowed as such discount” in Rule 3(2)(c) of Karnataka VAT Rules cannot be construed to mean that discount would be inadmissible as deduction unless originally issued tax invoice pertaining to goods shows the discount; However, clarifies that assessee must establish from its accounts that the discount relates specifically to the sales with reference to which it has been allowed; States that first part of proviso to Rule 3(2)(c) that recognizes trade practice or contract / agreement of dealer must be construed together with latter part which provides a methodology for ascertainment; Accordingly, directs application of parameters laid down by 2 Judges Bench in case of Southern Motors, which had read down first proviso by Rule 3(2)(c) by observing “…the requirement of reference of the discount in the tax invoice or bill of sale to qualify it for deduction has to be construed in relation to the transaction resulting in the final sale / purchase price and not limited to the original sale sans the trade discount.”
Citation: [TS-28-SC-2018-VAT]