TMI Blog1988 (9) TMI 78X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT(A) was of the view that the completed contract method may be a recognised method from accounting point of view, but it cannot be accepted for the purpose of computing the income of the assessee company under the IT Act, because each year is a self-contained and distinct unit of time for purposes of assessment. Therefore, he held that the profits made of the liabilities and losses incurred before or after the relevant previous year are immaterial in assessing the profits of that year. While coming to this finding, the CIT(A) placed reliance on the decision of the Patna High Court in the case of Sukhdeodas Jalan vs. CIT (1954) 26 ITR 617 (Pat). The assessee is aggrieved and has come in appeal before us. 4. The learned assessee counsel, Shri Dastur submitted that the method of accounting employed by the assessee is consistently followed by him and it can properly deduce the profit of the company. Therefore, there was no occasion for the Revenue authorities to apply the provisions of s. 145 of the IT Act. Having regard to the method of accounting adopted by the assessee, the profit or loss on the contract with the Bombay Municipal Corporation is assessable to tax in the year in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee was engaged in a contract which lasted for a number of years and final contract was completed in the asst. yr. 1984-85. The submission of the assessee is that the completed contract method is a recognised method from accounting point of view and it should be accepted. Whatever are the final results, they should be taken into consideration and spread over a number of years. As against this, the Department has taken the view that each year is a self-contained and distinct unit of time for the purpose of assessment and, therefore, the profit made or liabilities and losses suffered before or after the relevant previous year are immaterial in assessing the profit of that year. The Department has applied the provisions of s. 145 and estimated the profit at 20 per cent of the amount billed by the assessee from the Bombay Municipal Corporation. 7. So far as the method of computation of income in the case of a contractor is concerned, the issue came up for consideration before the Hon'ble Patna High Court in the case of Sri Sukhdeodas Jalan, wherein the Hon'ble Patna High Court has laid down the following principle: "In the case of contracts, if accounts are maintained an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decision, the Tribunal held that what the Department is to see is that the method of accounting employed must be such as to deduce true profits therefrom and that method of accounting should be consistently followed. Once these facts are satisfied the method of accounting adopted should not be rejected. In the latter case, it was held that the established practice in the case of assessee, namely, to assessee the profits relating to the supervision charges on completed contract basis was a correct method. 9. The case before the Hon'ble Bombay High Court in the case of K.H. Modi: In re related to an assessee who was engaged in the business of land development and he was purchasing and selling the land and in the circumstances, the Hon'ble Bombay High Court has held that when there is a single venture in the nature of trade the question of assessing profits arises only when the venture comes to an end. In another case before the Hon'ble Bombay High Court, i.e. A. Moosa Sons, Bombay, where the assessee had a tailoring shop and he supplied miscellaneous stores to ships on a fairly large scale. The ITO found that the sales effected by him in the accounting year approximated to Rs. 5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... view, be adopted for determining the actual cost of the assets in the absence of any statutory definition or other indication to the contrary." In our view, this observation of the Hon'ble Supreme Court is not relevant to the facts of the present case. We are of the opinion that the facts and circumstances of the cases cited by the learned assessee counsel are different from the facts and circumstances of the present case and therefore the decisions in those cases cannot be imported to the facts and circumstances of the present case. As regards the decisions of the Tribunal relied by the assessee are concerned, we find that the Tribunal has also taken a different view of the case of Champion Construction Co. vs. First ITO (1983) 5 ITD 495 (Bom) where the assessee undertook a project for construction of a multi-storeyed building and sale of flats therein and the project was completed during the asst. yr. 1978-79, though only 80 per cent of the total area was sold. The assessee has raised the same contentions as raised in the present case and the Department applied net profit at the rate of 30 per cent for taxation. The Division Bench of the Tribunal in that case has laid down the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat in the case of contracts, we need not wait till the contract is completed in order to ascertain the income and it is open to the Revenue to estimate the profit on the basis of the receipts in each year although the contract was not completed. 11. The assessee counsel alternatively contended that if the income is directed to be assessed on year-to-year basis and not on the completion of the contract, while estimating the profits for these years, the overall results of the contract should be borne in mind and the result of the contract being a loss, it was submitted that no income was assessable for these years. 12. As regards this alternative contention is concerned we do not find any discussion on this point in the order of the lower authorities, probably as the contract was not completed when appeals were decided by the CIT(A). 13. In view of the fact that the appeals for the subsequent years are also pending before the assessing authorities, and in view of the alternative contention of the assessee, we feel that it would be in the fitness of the things that a uniform decision is taken for all the years together by the CIT(A). We, therefore, send the matter back to th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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