The tax authorities have always disputed the claim of post-sale trade discounts (cash or quantity discounts) claimed by the taxpayers on the ground that the said discounts were not linked to any sale invoices. Hence, claim of deduction towards such discounts from the sales turnover were disallowed. In a landmark decision, the Supreme Court held that all trade discounts are allowed as permissible deductions and the taxpayer would be entitled to a deduction of the trade discount so long as the taxpayer was able to establish from its accounts that the discount related specifically to sales with reference to which it was allowed.
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