TMI Blog1973 (7) TMI 41X X X X Extracts X X X X X X X X Extracts X X X X ..... s in these circumstances : The assessee, Messrs. D. P. Wadia Sons, is a registered-firm consisting of 3 partners carrying on business as a contractor. The relevant assessment year in respect of which the question arises is 1956-57, for which the accounting year is the financial year ended March 31, 1956. During the accounting year the assessee carried out certain works directly and certain other works through three sub-contractors and in this reference we are concerned with 16 items of work which were carried out by the assessee through one of such sub-contractors, namely, H. R. Gopalswamy, and these works related to the Government of India Printing Press at Nasik. As per its usual terms with such sub-contractors the assessee was to retai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to him. It was pointed out to the taxing authorities that a suit for recovery of the balance out of the advances that was due from Gopalswamy had been filed in the court of the civil judge, senior division, Nasik, being Special Suit No. 41 of 1957. It may be stated that although the assessee has been established contractors of several years standing it has year to year refused to maintain regular books of account for its business and, therefore, every time it has been a case of estimated income to be disclosed by the assessee and the estimated income to be ascertained by the Income-tax Officer. The profit in respect of the sub-contract in regard to Nasik work was, therefore, estimated by the Income-tax Officer on the basis of the total bil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it had nothing to do with the accrual of the profits from the contract in which the assessee had at least a 5% share as per arrangement. He, therefore, upheld the rate of 5% at which the net profit was to be calculated and adopted by the Income-tax Officer and rejected the claim for loss. Before the Tribunal the decision of the Appellate Assistant Commissioner in so far as it related to the estimate of net profit was upheld. The claim for the allowance of the loss was pressed on behalf of the assessee on two alternative grounds, one under section 10(1) of the Act and the other under section 10(2)(xv) of the Act, and the Tribunal expressed the opinion as follows : " The assessee has received the contract takings from the Government dir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tended before us that out of the two grounds given by the Tribunal for rejecting the claim for allowance of the loss, the first ground was not sustainable in law, for, according to Mr. Munim, in the first place, the question whether advances had been recklessly made or whether advances had been prudently made could not be a valid consideration for deciding the question as to whether advances could be regarded as expenditure incurred as being incidental to business and, secondly, he urged that even the finding that the advances were recklessly made could not be sustained because if regard was had to the total value of the sub-contract which had been sub-let to Gopalswamy, it could not be said that the advances were reckless. In that behalf h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... correct to say that there was material on record to show that the irrecoverable amount had been identifiably made during the previous year. It is not possible to accept this submission of Mr. Munim for the simple reason that all that the Income-tax Officer and the Appellate Assistant Commissioner have done while disposing of this question is that they have merely set out as and by way of recitation of fact that the statement had been prepared by the assessee showing the total advances made to Gopalswamy, the sub-contractor, during the year of account and the total amount of recoveries said to have been made out of such advances during the relevant accounting year but there is no statement or averment to be found in the orders passed either ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the suit filed by the assessee against the sub-contractor (copy of which has been annexed as annexure " D ") certain figures have been given by the assessee as the plaintiff in that suit and according to relevant averments which are to be found in para. 6 of the plaint it will appear that according to the assessee the firm had advanced to the sub-contractor from January 10, 1955, to June 18, 1956, several amounts to the extent of Rs. 5,90,528-4-0 and that the assessees have been able to recover Rs. 4,47,054-12-0 from out of the bills of the Government till the construction of work was stopped by the sub-contractor. In other words, the total figure of advances said to have been made by the assessee to the sub-contractor from January 10, 195 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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