9911796707
TMI Blog1983 (12) TMI 8X X X X Extracts X X X X X X X X Extracts X X X X ..... t of the gross amount due to the assessee in respect of the completed contract, after deducting the value of the materials supplied to the assessee for the execution of the contract. The ITO rejected the books of account maintained by the assessee on the ground that they suffered from certain defects and applied a net profit of 12 1/2%. On appeal by the assessee, the AAC while maintaining the estimate of net profits at the rate of 12 1/2% in respect of the contracts directly executed by the assessee, applied 7 1/2% profit rate in respect of the contracts which were supervised by other persons employed by the assessee. On further appeal to the Income-tax Appellate Tribunal (hereinafter called " the Tribunal "), both by the assessee as well ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (SC), the said question did not require elaborate consideration and the law on the point has been set at rest by the decision of their Lordships of the Supreme Court in Brij Bhushan Lal's case. Their Lordships of the Supreme Court observed as under in Brij Bhushan Lal's case (p. 532): " In substance and in reality, such stores/material always remains the property of the Department and the contractor has merely the custody of it and he fixes or incorporates the same into the works. It seems to us clear that in such circumstances and having regard to the terms and conditions on which such supply of stores/materials is made, there is not even a theoretical possibility of any element of profit being involved in the turnover represented by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ms from such contracts will have to be determined on the basis of the value of the contacts represented by the cash payments received by the assessee firms from the M. E.S. Department exclusive of the cost of the material/stores received for being used, fixed or incorporated in the works undertaken by them." Thus, following the principles laid down by their Lordships of the Supreme Court, we hold that the value of the materials supplied by the State Government to the contractor for being exclusively used for the execution of the work is to be excluded while determining the turnover of the contractor-assessee. In our opinion, the Tribunal was, therefore, right in holding that the cost of materials supplied by the State Government should no ..... X X X X Extracts X X X X X X X X Extracts X X X X
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