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TMI Blog1983 (12) TMI 41X X X X Extracts X X X X X X X X Extracts X X X X ..... epartment was not to be included in the gross receipts of the business for the calculation of the profit of the assessee's business at the estimated net profit adopted for the purpose ?" The assessee is a building contractor and had executed four works worth Rs. 8,84,219 on behalf of M.E.S., Delhi, during the preceding year relevant to the assessment year 1966-67. The ITO applied the net profit rate of 12% to his turnover, while assessing tax for the assessment year 1966-67. On appeal, the AAC applied the net profit rate of 10%. When the matter went in second appeal before the Income-tax Appellate Tribunal (hereinafter referred to as " the Tribunal "), the assessee raised the question that no amount of profit should be calculated on the va ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in respect of the materials supplied by the Government department for the execution of the contracts, as such in the best judgment assessment, the value of the materials supplied by the Government department should not be included while applying the net profit rate to the income of the assessee. However, the Punjab and Haryana High Court in Brij Bhushan Lal v. CIT [1971] 81 ITR 497 and again in CIT v. Brij Bhushan Lal Ramesh Kumar [1976] 102 ITR 430, took a contrary view and held that the percentage of profit in the case of such a contractor is not determined with respect to each item of the material involved in the performance of the contract, but on the amount of the whole contract and the same could not be divided in different parts ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere certain stores/material is supplied at fixed rates by the department to the contractor solely for being used or fixed or incorporated in the works undertaken on terms and conditions mentioned above, the real total value of the entire contract would be the value minus the cost of such stores/material so supplied. Therefore, since no element of profit was involved in the turnover represented by the cost of stores/material supplied by the M.E.S. to the assessee-firms, the income or profits derived by the assessee-firms from such contracts will have to be determined on the basis of the value of the contracts represented by the cash payments received by the assessee-firms from the M.E.S. department exclusive of the cost of the material/store ..... X X X X Extracts X X X X X X X X Extracts X X X X
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