TMI Blog1979 (9) TMI 56X X X X Extracts X X X X X X X X Extracts X X X X ..... if it means that some part of the materials supplied to the assessee belonged to the Government department and always remained their property but used by the assessee in the execution of the contract. If this fact had been clearly indicated, it would have been easier to answer this question. The question, however, is restricted to the facts and circumstances of the case and, therefore, the facts and circumstances, as obtained in this case, are now being stated. The assessee is a firm of contractors, registered under the I.T. Act. it is not known, however, as to what are the things which he undertook to execute as a contractor, The aforesaid question has been posed for the assessment years 1972-73 and 1973-74. For both these assessment y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the materials had been made from the gross payment. On these grounds he held that on the value of the materials the assessee could not have earned any profit and, therefore, the net profit should be assessed not on the gross receipts but on the gross receipts less the value of the materials in each year. The department being aggrieved by the orders of the AAC, appealed to the Tribunal which set aside the order of the AAC and restored the order of the ITO. The Tribunal was apprised of the terms of the contract and also of the total value of the contracts, as also of the value of the materials said to be deducted out of the gross receipts. The Tribunal, however, found that in the absence of stock register for the materials received, ei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submitted that the argument made on behalf of the assessee was wholly untenable in the absence of relevant facts concerning the terms on which the materials, if any, were supplied to the assessee by the department concerned. Mr. Rajgarhia submitted that, may be that the entire materials used by the assessee in the contract might have been purchased by the assessee himself from the departments, or might have been purchased even from outside. On the use of such materials in the execution of the contracts, Mr. Rajgarhia submitted, an element of profit would always be present in the value of the materials used and, therefore, the Tribunal's order restoring the ITO's orders were valid and should be upheld. According to Mr. Rajgarhia, the questi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s the department calculates the value of the contract on a lump sum basis, namely, the value of the materials supplied as also the payment made towards labour cost in the execution of the contract. Now in all these distinct forms of contract, the answer to the question as to whether the value of the materials would figure for the purpose of ascertaining the contractor's net profit would be different. For example, in an overall contract, net profit will have to be ascertained upon the entire value of the contract, including the value of the materials also. In a works contract, the value of the materials has to be wholly excluded, because the contractor has no concern whatsoever with the materials except for the purpose of putting them int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... faced, since the very beginning of these assessments, has been the absence of stock register for the materials received from the department or of materials purchased by the assessee itself. The absence of the issue register also matters in this regard. Keeping these facts in view, the Tribunal came to the conclusion that-- "...There are no other circumstances to show that the materials were throughout under the control of the department and were not under the control of the contractor except for the purpose of using it in the construction. In such circumstances, we are of the view that the gross payment should be adopted as the basis for working out the profit..." On the facts and in the circumstances of this case, therefore, we have got ..... X X X X Extracts X X X X X X X X Extracts X X X X
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