RAMANUJAM, J.

These two cases relate to the same assessee in relation to two different assessment years, 1964-65 and 1965-66. The assessee, in the course of the assessment under the Central Sales Tax Act, 1956

The learned counsel for the assessee contends that the assessee is maintaining its books of account on a mercantile basis, that the amount allowed as discount to each of the distributors is credited to their accounts at the end of the year and that such crediting is as good as cash payment. It is urged that the amount given as discount actually goes to reduce the sale price payable by the distributors, that it never forms part of the consideration of the sale and that, therefore, it is only the net amount after deducting the said discounts that can be taken to be the taxable turnover. The learned counsel placed before us the details of the discount scheme that was effective during the assessment years in question. The scheme itself is called "bonus discount scheme" and the benefit of the scheme is not extended to all the customers but only to the distributors whose net purchases of all the finished products from the assessee exceeds the target figure agreed to between the parties. The bonus discount given under that scheme is called "rebate" and the rebate to be given is subject to certain terms and conditions. The following conditions, namely, conditions 3 to 5, appear to be relevant here :

"3. Any rebate due will not be paid in cash but credited to your current account to be adjusted against further despatches to be made against your orders. Accordingly, it must not be in any circumstances regarded as an anticipated credit to contra accounts falling due before the rebate is actually credited to your account and credit note passed to you.

4. We reserve the right, at our sole discretion, to vary or cancel the scheme, at any time, in the event or circumstances arising of whatever nature, which, in our opinion, render a continuance of the scheme impossible.

5. If any difference or dispute shall arise having reference to this bonus discount scheme, or the amount payable thereunder, it shall be referred to our auditors, for the time being, whose decision must be accepted as final and binding. The object of this scheme is to co-operate with you to the fullest extent in anticipation of your turnover being increased during the current year. It is a gesture of our good faith coupled with the desire to serve you to the best of our ability." *

From the above conditions of the scheme, it is seen that the rebate due cannot be received in cash by the purchaser, and that it does not reduce the actual sale value of the goods already purchased and paid for. The amount of rebate is credited to the customer's account and it is treated only as a reserve which the distributors can draw to make future purchases. The ultimate effect of the grant of rebate by the assessee in pursuance of this particular expansion scheme is that at the end of the stated period the customer gets credit for a specified amount depending upon the total purchases effected by him during that period and that such credit can be used only for the purchase of goods in future from the assessee. Therefore, it is clear that the rebate or bonus discount granted by the assessee does not directly or indirectly go to reduce the pre-determined or pre-paid sale price. Therefore, the amounts paid as rebate or bonus discount cannot be taken to be in reduction of the actual sale price agreed or paid for the goods purchased earlier by the distributor. As per the scheme, the distributors whose total value of the purchases from the assessee exceeds the predetermined target figure, five per cent of the net purchase is given as bonus discount and the said five per cent is determined after the close of the agreed period. It is true that the five per cent bonus discount given by the assessee to the distributors is treated as a credit reserve for making future purchases, but it does