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TMI Blog1976 (8) TMI 49X X X X Extracts X X X X X X X X Extracts X X X X ..... ts net profits for the assessment years 1965-66, 1966-67 and 1967-68 ? " The facts, on the basis of which the abovementioned question of law has been referred, may be stated as follows. The assessee is a building contractor. He is a retired officer of the military engineering service and he started business of executing constructional contract works under the military authorities but he did not produce any books of account before the Income-tax Officer on the ground that he was not maintaining any account books. The relevant assessment years are 1965-66, 1966-67 and 1967-68. In the assessment year 1965-66 the assessee filed a return declaring an income of Rs. 35,000 showing the total receipts from contract works at Rs. 3,45,025 and on w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of materials supplied by the M.E.S. department for which deductions were made from the bills and the Income-tax Officer added this amount to the net contract value to arrive at the gross value of the work executed by the assessee during that year. The Income-tax Officer thus held that the net receipts shown from contract work came to Rs. 3,47,525 and on this net receipt he took the value of the materials at 10% at Rs. 34,000 and thus he held that the gross receipt in the assessment year 1965-66 was Rs. 3,81,525. On this gross receipt he estimated the net profit at 12 1/2 % for the assessment year 1965-66, which came to Rs. 47,690 before allowing depreciation. Similarly, for the assessment year 1966-67 the Income-tax Officer estimated the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly net receipts should be taken into consideration for all purposes. On the above facts, the abovementioned question of law has been referred. The question that falls for determination is whether the value of the materials supplied by the M.E.S. department for performance of the contract under the M.E.S. department has to be taken into consideration in calculating the income of the assessee on estimate basis. The assessee's contention was that the materials for the construction works were supplied under the terms of the contract by the M.E.S. department and, therefore, the assessee had, no question of making any profit on the materials supplied by the M.E.S. department and hence this should not be taken into consideration while calcul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nite understanding that the department is to supply the required materials for the construction of the buildings, the rates quoted by him would have been adjusted on that basis. Under the circumstances we hold that there is no element of profit on the cost of materials supplied by the department. We, therefore, hold that the net profit will be calculated on the net receipts as found by the Income-tax Officer and the Appellate Assistant Commissioner and the addition of 10% relating to the value of materials on the net receipts will be ignored in calculating the profits on the contract receipts. " Thus, it is found that the learned Tribunal has clearly held, on the facts and circumstances of the case, that there was no element of profit so ..... X X X X Extracts X X X X X X X X Extracts X X X X
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