Rebate as defined in the New International Webster’s Pocket Dictionary and Bloomsbury Concise English Dictionary is “discount”, to allow as a deduction from a gross amount. It is a discount repaid to the payer. Rebate as defined in Corpus Juris Secundum, Vol. 52 CJ, P. 1189 is “The etymological or dictionary meaning of the term includes any discount or deduction from a stipulated payment, but handed back to the payer after he has paid the stipulated sum, even when such discount or deduction is equally applied to all from whom such payment is demandable.”
Rebate is though ex hypothesi in the nature of subsidy and other incentives given by the Government but conceptually rebate of tax and incentives are different and it needs to be explained in reference to the purpose and nature of such rebate of tax introduced by the Legislature. The claim for rebate need not necessarily be handed back to the payer after he has paid the stipulated sum, it can also be paid in advance of payment. It is nothing but a remission or a payment back or it is sometimes spoken of as a discount or a drawback.
Rebate as defined in Estate of Bernard H. Stauffer v. Commissioner of Internal Revenue, 48 TC 277 (1967), means abatement, discount, credit, refund or any other kind of repayment. Rebates have been normally used as justifiable incentives given by the Government to stimulate small industries or newly established industries. But to understand rebate of tax as rebate per se would be a misnomer. Rebate of tax is the rebate on rate of tax and is essentially the arithmetic of rate. The term “rate” is often used in the sense of standard or measure. It is the tax imposed at a certain measure or standard on the total turnover of the goods. Rate, in other words is the relation between the taxable turnover and the tax charged.
Rebate of tax or exemption is distinguished from non-imposition or non-liability in A.V. Fernandez v. State of Kerala, AIR 1957 SC 657, wherein the court held:
“In rebate of tax, the sales or purchases would have to be included in the gross turnover of the dealer because they are prima facie liable to tax and the only thing which the dealer is entitled to in respect thereof is the deduction from the gross turnover in order to arrive at the net turnover on which the tax can be imposed.” State of Uttar Pradesh and Others v. Jaiprakash Associates Limted, (2014) 4 SCC 720.
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