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Issues:
1. Calculation of net profit on structural contracts inclusive of materials supplied by the Government. 2. Modification of the percentage adopted by the authorities in estimating net profit. Analysis: The case involved a contractor assessed for various years, with the main issue being the calculation of net profit on structural contracts considering materials supplied by the Government. The Income-tax Officer initially estimated the income due to unaccepted accounts. The Appellate Assistant Commissioner applied a flat rate of 12.5% on net receipts, excluding material value. However, the Tribunal disagreed, upholding the Income-tax Officer's assessment based on gross receipts, including material cost. The Tribunal set aside reassessments for earlier years but allowed the department's appeal for the 1962-63 assessment. The assessee argued citing a Madras High Court case where material cost was excluded from income calculation due to no profit element. The Kerala High Court also supported excluding material costs from turnover calculation. The revenue contended that estimates were made on gross receipts from the beginning under section 145. They relied on two Calcutta High Court judgments supporting gross profit calculation on total gross bills, not excluding material costs if included in the contract. The court noted the lack of clarity on contract terms regarding material supply and remanded the matter to the Tribunal for further findings. The Tribunal was directed to determine if there was a profit element in the supplied materials, which would impact profit estimation based on gross receipts. The remand was specific to the 1962-63 assessment year, with other years concluded in favor of the assessee. No costs were awarded in the circumstances. The judgment highlights the importance of contract terms regarding material supply in determining net profit on structural contracts. It underscores the need for factual findings on profit elements in supplied materials before estimating profits based on gross receipts. The remand to the Tribunal for further investigation ensures a comprehensive assessment based on contract specifics, ensuring a fair determination of the assessee's income for the relevant assessment year.
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