( 1. ) THIS is a reference made by the Board of Revenue, Gwalior, at the instance of the department under Section 44 (1) of the M. P. General Sales Tax Act, 1958, for the opinion of this Court regarding the following question of law :

Whether, in the facts and circumstances of the case, the Tribunal was justified in holding that the reimbursement of Rs. 33,263 received from the principals will not form part of the sale price as defined under Section 2 (o) of the M. P. General Sales Tax Act, 1958 ?

( 2. ) THE facts giving rise to this reference as per the statement of case received are as follows : The non-applicant, M/s. Rita Sales Corporation, Indore, are distributors for Rita sewing machines and electrical goods. The non-applicant was assessed to tax for the financial year 1975-76. Best judgment assessment was made and the gross turnover was determined as Rs. 8,40,000 against Rs. 8,03,809 shown in the books of account. Enhancement of Rs. 2,927 was made on account of certain discrepancies and the amount of Rs. 33,263 paid by the principals towards 50 per cent cost of timepieces sold by the non-applicant to the retail dealers at half price was also included in his turnover. The assessing authority observed that sale at 50 per cent cost price was to favoured buyers within the ambit of Section 18 (7) of the Act. The assessment was maintained in first appeal before the Appellate Assistant Commissioner. Against this order second appeal was preferred before the Tribunal which allowed the appeal and the enhancement made in the dealers turnover was set aside. Hence this reference at the instance of the department.

( 3. ) IT was agitated before the Tribunal that there was no justification for including the amount of Rs. 33,263 which was received from his principals, in his gross and taxable turnover. It was argued that the principals introduced a gift scheme under which timepieces were made available to retail dealers at 50 per cent of the cost price, and these were to be supplied free of cost to each customer, who purchased a Rita sewing machine. Fifty per cent of the cost of these timepieces was paid to the respondent by the retailers and the balance 50 per cent which came to Rs. 33,263 was made available to him by the principals. Thus the amount received from the principals did not form part of the sale price received by the respondent from his principals. At best it could be considered as a sort of cash discount which will not form part of sale price.

( 4. ) ON behalf of the department it was contended that part of the price received from the principals constituted consideration of the cost of timepieces as a part of sale price and therefore it should be included in the gross turnover and the taxable turnover. It cannot be called a cash discount because the respondent had received that money as consideration of the value of the goods.

( 5. ) IT is in these circumstances that the Tribunal has made this reference. ( 6. ) THE learned counsel for the department submitted that it is not disputed that the supply of these timepieces was part of the gift scheme introduced by the Rita sewing machine manufacturers. The actual purchase of timepieces was, however, made" by the respondent who acted as distributor and the timepieces were sold by him to retail dealers at half price. The retail dealers were required to supply them free to each customer buying a Rita sewing machine. On these facts, it was submitted, that thus there being an agreement between the manufacturer, the distributor and the retail dealer, the retail dealer was to supply the timepiece free and thus there was no sale in his case. The distributor, namely, the respondent, was required to purchase the timepieces and sell them to the retail dealers at half the price and the balance amount representing 50 per cent of the cost of timepiece was received from the manufacturer. It was, therefore, submitted that so far as the respondent-dealer is concerned on the sale of timepie