Higher discount rate offered to sister concern not subject to disallowance u/s 40A(2)(b) – All HC

CIT v Bhargav Book Depot [2013] 40 taxmann.com 213 (Allahabad)


Assessee deals in printing and publication of books/diaries and sale thereof. During the course of assessment proceeding, the AO found that the assessee had sold Bhargav Dictionary though its sister concern “Sri Ganga Pustkalay” and had offered a discount of 3% whereas it had offered a discount of 0.5% less to other whole sellers . The AO further found that the sale price of dictionary was lesser by 18% when it was sold to M/s Sri Ganga Pustakalay. The difference of half percent was disallowed under Section 40-A (2) (a) and (b) of the Act and addition of Rs.15,97,401 was also made under Section 40-A (2) (a) and (b) of the Act. The matter was carried in appeal. The Commissioner of Income Tax (Appeals) has accepted the claim of the assessee and deleted the addition, which order has been upheld by the Tribunal on an appeal preferred by the Revenue.


  • The assessee had offered 2.5% on the counter sales whereas 3% discount was given to sister concern, M/s Sri Ganga Pustakalay, which was carrying the sale outside Varanasi and incurring the expenses on account of packing, transportation etc.
  • The Tribunal has held that the provisions of Section 40A(2)(a) of the Act would apply where any deduction is claimed towards excessive and unreasonable expenditure has been incurred by assessee.
  • In the present case neither any expenditure has been incurred nor any deduction has been claimed for the amount which has been charged less than that from other customers, thus provision would not apply. 
  • It is not disputed that the assessee has neither claimed any deduction as expenditure incurred towards discount offer nor the lesser price charged by it. The Tribunal has rightly held that provisions of Section 40A (2) (a) of the Act would not be attracted in the present case. 

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