Discount claims must be validated with evidence of regular practices or agreements, per specified tax rules.

1 This T. R. C. is filed against the order in T. A. No. 1081/99. The relevant assessment year is 1989-90. The facts of the case are as follows:

2 The petitioner is a dealer in electrical goods at Ernakulam. The question raised in the case relates to the applicability of the discount in accordance with the regular practice under R.9(a) of the Kerala General Sales Tax Rules, 1963. The Assessing Authority while completing the assessment for the year 1989-90, disallowed the claim of deduction of special discount under R.9(a) of the Kerala General Sales Tax Rules. The Deputy Commissioner affirmed the same. The Tribunal after hearing the parties, dismissed the appeal. It is against that this revision is filed. In Para.4 of the order of the Tribunal, the Tribunal stated as follows: "it can be seen that one of the conditions to be satisfied in order to be eligible for the deduction under R.9(a) is that the discount is allowed in accordance with the regular practice of the dealer or is in accordance with the terms of the contract or agreement entered into in a particular case. The appellant's learned representative admits that there is no contract or agreement. He has not been able to explain with proper evidence the circumstances under which special discount has been allowed by the appellant. The appellant had claimed trade discount and cash discount amounting to Rs. 34,068.89. This claim has been allowed by the assessing officer. The appellant has further claimed deduction of Rs. 1,31,586.09 as special discount in the books of accounts. A list was filed claiming a further amount of Rs. 36,872.56 as special discount. Thus, the aggregate claim of special discount worked out to Rs. 1,68,458.62. It was this special discount that was not allowed by the assessing officer. As stated earlier, the assessing officer had allowed trade discount and cash discount amount of Rs. 34,068.89". The Tribunal further held as follows: "At the time of hearing, the appellant's learned representative produced before us the books of accounts to show that credit notes had been issued for special discount and the purchasers' account has been credited with the special discount. But as stated earlier, he has not been able to explain the circumstances under which special discount has been granted to the customers. It is for the appellant to establish that the special discount is regular trade practice. It is to be noted that trade discount and cash discount has been allowed as deduction. The appellant has not been able to explain the circumstances under which special discount has been allowed to their customers."

3 Learned counsel for the petitioner brought to our notice a decision of the Supreme Court reported in Deputy Commissioner of Sales Tax (Law), Board of Revenue (Taxes), Ernakulam v. Motor Industries Co. (53 STC 48). In the above case, the Supreme Court observed as follows:
"Under clause (a) of R.9 of the Rules all amounts allowed as discount where such discount is allowed in accordance with the regular practice of the dealer or is in accordance with the terms of contract or agreement entered into in a particular case have to be deducted from the total turnover in determining the taxable turnover provided the accounts of the assessee show that the purchaser has paid only the sum originally charged less the discount. In the instant case the 'service discount' in respect of which the deduction was claimed by the assessee was the additional trade discount allowed by it to its main distributors (purchasers), namely, the T. V. S. group of companies, which constitute a prestigious group of commercial concerns over and above the normal trade discount in consideration of the extra benefit derived by the assessee by reason of the marketing of its goods through them. This additional trade discount is allowed in accordance with the trade agreement subject to periodical variation depending upon the cost structure and changes in market conditions. It is not disputed that