TMI Blog1985 (2) TMI 22X X X X Extracts X X X X X X X X Extracts X X X X ..... r including a sum of Rs. 13,027 to the total receipts, he applied a rate of 13.7 per cent. on the total receipts of Rs. 4,06,572 subject to a deduction of depreciation on trucks. Gross income prior to the adjustment of depreciation was arrived at Rs. 55,700. Total income was computed at Rs. 56,549 as against the income returned at Rs. 15,157. Being aggrieved, the matter was taken in appeal to the Appellate Assistant Commissioner and it was contended on behalf of the assessee that the addition of Rs. 13,027 to the total receipts and the inclusion of the cost of materials supplied by the Government were not justified. A certificate from the Executive Engineer, Public Works Department, Jalpaiguri Division, was produced in support that no pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ards the other amount of Rs. 13,027, it represents a payment on account of security deposit and, as such, this amount too had been correctly excluded from the gross receipts as calculated by the Income-tax Officer. " On the aforesaid facts, at the instance of the Revenue, the following question of law has been referred to this court under section 256(1) of the Income-tax Act, 1961 : " Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that in computing the assessee's business income on estimate, a flat rate of profit should be applied not on the amount of the gross bill, but on the net amount after deduction of the cost of materials supplied by the Government ? " The question in this referenc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pts. There the Supreme Court, reversing the decision of the High Court, held that since, in substance and reality, materials supplied by the Government always remained the property of the Government and the assessee merely had custody and fixed or incorporated them into the works, there was not even a theoretical possibility of any element of profit being involved in the turnover represented by the cost of such materials. Since no element of profit was involved in the turnover represented by the cost of materials supplied by the Government to the assessee, the income or profits derived by the assessee from such contracts had to be determined on the basis of the value of the contracts represented by the cash payments received by the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X
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