Full Judgment Text
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PETITIONER:
BRIJ BHUSHAN LAL PARDUMAN KUMAR ETC.
Vs.
RESPONDENT:
COMMISSIONER OF INCOME TAX, HARYANA, HIMACHAL PRADESH ANDNEW
DATE OF JUDGMENT06/10/1978
BENCH:
TULZAPURKAR, V.D.
BENCH:
TULZAPURKAR, V.D.
BHAGWATI, P.N.
CITATION:
1979 AIR 209 1979 SCR (2) 16
1979 SCC (3) 14
CITATOR INFO :
RF 1989 SC 285 (9)
ACT:
Liability to tax-Whether in a lump sum contract, where
the stores and materials are supplied by the Government, the
cost thereof was liable to be taken into account while
estimating the income or profits of the assessee contractor-
Best Judgment assessment, principle to be followed.
HEADNOTE:
The appellant assessees are Military Engineering
Services’ contractors and as such carry on business of
executing contracts and work on behalf of the Government.
Their contracts are "Lumpsum contracts" where the department
supplies the materials at fixed rates. The revenue was of
the opinion that the cost of the materials supplied by the
military authorities was liable to be included before
applying the flat rate to the assessee’s receipts and
estimating the profits for the purposes of tax liability.
The High Court of Punjab and Haryana on a reference at the
instance of the Revenue confirmed it following its own
earlier Judgments in the case of Brij Bhushan Lal v. C.I.T.
Delhi, ( 1971 ) 81 I.T.R. 497.
Allowing the appeals by special leave, the Court,
^
HELD: l. The law relating to ’best judgment assessment’
is same both in the case of income tax assessment and the
sales tax assessment. The authority making a best judgment
assessment must make an honest and fair estimate of the
income of the assessee and though arbitrariness cannot be
avoided in such estimate the same must not be capricious,
but should have a reasonable nexus to the available material
and the circumstances of the case. [22G-H, 23D-E]
Commissioner of Income Tax v. Laxminarain Badridas,
(1937) S I.T.R. 170 (PC), Raghubar Mandal Harihar Mandal v.
State of Bihar, (1957) 7 S.T.C. 770 at p. 778 and State of
Kerala v. C. Velukutty, (1966) 60 I.T.R. 239; referred to.
2. Ordinarily when a works contract is put through or
completed by a contractor the income or profits derived by
the contractor from such contract is determined on the value
of the contract as a whole and cannot be determined by
considering several items that go to form such value of the
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contract but where certain stores/material is supplied at
fixed rates by the Department to the Contractor solely for
being used for fixed or incorporated in the works undertaken
on terms and conditions mentioned in the contract, the real
total value of the entire contract would be the value minus
the cost of such stores/matrial 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
17
firms from the M.E.S. Department exclusive of the cost of
the material/stores received for being used, fixed or
incorporated in the works undertaken by them. [26E-H]
In Lumpsum contracts of‘ M.E.S. Department two salient
features are always present namely, ( 1 ) there is a
Schedule ’B’ which specifies the items of stores/material to
be supplied by the Department to the contractor solely for
being used, fixed or incorporated in the works together with
the fixed rates R at which the same will be supplied and
such supply is governed by General Conditions Nos. 10 and
33; apart from the stores/material specified in Schedule ’B’
the contractor also brings his own stores/material on site
for the purposes of the works which is also governed by some
Paragraphs of General Conditions Nos. 10 and 33; and (2) the
final financial liability of the Government is fixed on
completion of the contract on the basis of the actual
measurements and on the basis of the rates which are already
standardised; a detailed measurement is undertaken at the
end of the work at which the Garrison Engineer and the
Assessee’s representative remain present and the
measurements, are entered in Measurement Books and after the
measurements final bills are prepared as per the M.E.S.
Schedule and payments are made after making adjustments for
the advances already made. [24A-D]
From the tender documents that are made available to
contractor and the aforesaid terms and conditions of the
"Lump Sum Contracts" two or three aspects emerge very
clearly. In the first place the contractor becomes aware
that certain specified stores/materials will be supplied to
him by the Department at fixed rates for being used in the
works to be undertaken by him for which he has not to pay
from his pocket and it is on that footing that he submits
his tender quoting a particular figure for the entire work;
Secondly, such stores/material so supplied by the M.E.S.
Department has to be used, fixed or incorporated by the
contractor in the works undertaken by him and the surplus,
if any, that would remain after the completion of the work
is to be returned to the Department; thirdly, since for
accounting purposes the initial supply is debited to the
contractor at the specified fixed rates, credit for the
balance of tho stores/materials so returned is also given at
the same rates, some adjustment being made in respect of the
wear and tear of such stores/material but in regard to the
stores material out of such supply as is actually used,
fixed or incorporated into the works, no accounting is done
viz-a-viz the contract payment that is made to the
contractor. In other words, in substance and in reality such
stores/material always remains the property of the
Department and the contractor has merely the custody of it
and he files or incorporates the same into the works. In
such circumstances having regard to the terms and conditions
on which such supply of stores/materials is made there is
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not even a theoretical possibility of any element of profit
being involved in the turnover represented by the cost of
such stores/materials. It is conceivable that when the
contractor himself purchases materials in the open market
and supplies the same to the Department by using fixing or
incorporating the same in the works. as in the case of
materials other than specified in Schedule ’B’ some profit
element would be embedded in the turnover represented by the
cost of such martial but when stores/material is supplied by
the Government Department at fixed rates for being used,
fixed or incorporated in the work on terms indicated above
there would be no element of profit involved in the turnover
represented by the cost of such material. [25G-H, 26A-E]
18
Brij Bhushan Lal v. Commissioner of Income Tax, Delhi,
(1971) 81 I.T.R. 497 (Pb and Haryana); overruled.
M. P. Alexander and Co. v. Commissioner of Income Tax
(1973) 92 I.T.R., 92 (Kerala); Commissioner of Income Tax,
Madras v. K. S. Guruswami Gounder and K S. Krishnaraju
(1973) 72 I.T.R. 90 (Madras); Trilokchand Chunilal v.
Commissioner of Income Tax Gujarat (1976) 107 I.T.R. 732
(Gujarat), Additional Commissioner of Income Tax v. Trikamji
Punia and Sons, (1977) 106 ITR 597 [AP (F.B.)]; approved.
JUDGMENT:
CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 1701
1703 of 1974.
Appeal by Special Leave from the Judgment and order
dated 26-9-73 of the Punjab & Haryana High Court in Income
Tax Reference Nos. 38/72, 2/73, 3/73.
S. T. Desai and Ramesh Chand for the Appellant.
P. G. Gokhale and Miss A. Subhashini for the
Respondent.
The Judgment of the Court was delivered by
TULZAPURKAR, J.-The short question raised in these
appeals by special leave is whether the cost of materials
supplied by the Government (M.E.S. Department) for being
used in the execution of works is liable to be taken into
consideration while estimating the profits of a contractor
and the question has assumed general importance as it
affects the entire class of contractors who undertake works
on behalf of the Government and in view of a conflict of
decisions on the point among different High Courts.
The facts in all the three appeals are substantially
the same though the assessees are different. In Civil Appeal
No. 1701 of 1974 the material facts are these: The assessee
(M/s. Brij Bhushan Lal Praduman Kumar of Ambala Cantonment),
a registered firm, is a Military Engineering Services
(M.E.S.) contractor and as such carries on the business of
executing contracts and works on behalf of the Government.
For the execution of the works undertaken by the assessee
certain material such as cement, coal, items of steel etc.
is supplied at the fixed rates specified in Schedule to the
contract by the Government for being used in the works. Such
material though in custody of the contractor always remains
the property of the Government and if any surpluses is left
at the completion of the contract, the contractor (assessee)
has to account for it at the same rates at which the supply
was made to him (wear and tear excepted) and return the same
to the Government. The assessment year involved was 1966-67
for which the accounting year commenced on 1-10-1964 and
ended on September
19
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30, 1965. The assessee-firm had taken two contracts, one at
Delhi A and the other at Ambala. For the said assessment
year it filed its return of income declaring income of Rs.
44,462 being 10% of the total cash payments of Rs. 4,44,622
received from the military authorities. The assessee,
however, did not furnish any figures about the stores
(material) received by it from the M.E.S. The Income-tax
officer called upon the assessee to produce the relevant
certificates in respect of such stores but the assessee
failed to do so on the ground that the Departments were not
cooperating with it. The Income-tax officer, therefore,
estimated the cost of such material at 50% of the cash
payments, namely, at Rs. 2,22,311 and by adding this figure
to the net cash receipts of Rs. 4,44,622 he arrived at total
receipts (including the cost of material) of Rs. 6,66,933
and after rejecting the book results applied a flat rate of
10% and worked out net income or profits at Rs. 66,693 which
was rounded upto Rs. 66,690 and on that basis the tax was
levied after allocating the said profits among the three
partners of the firm. The assessee preferred an appeal to
the Appellate Assistant Commissioner contending that the
addition of the cost of material supplied by the Government
to the figure of cash receipts received by it during the
year for applying the Hat rate of 10% was erroneous and in
any case the estimate of the value of such stores at 50% of
the cash payments was excessive. The Appellate Assistant
Commissioner rejected the first contention but reduced the
estimate of the value of the stores supplied by the
Government to 25% and con-fined the addition to Rs.
1,11,155. Aggrieved by that order the assessee preferred
further appeal to the Income Tax Appellate Tribunal and the
Tribunal accepted the contention of the assessee that the
cost of the stores or material supplied by the Government to
the assessee could not be added to the figure of cash
payments received by the assessee on the ground that the
stores (material) supplied by the Government F were ’never
sold’ to the contractor, that the same always remained the
property of the Government and that no profit could be said
to have arisen to the assessee when such stores (material)
was merely handled and manipulated by the assessee in the
execution of the works under the contract. The Tribunal
followed the decision of the Kerala High Court in M.P.
Alexander & Co. v. Commissioner of Income-tax(l) where that
Court has taken the view that the cost of such material
supplied by the Government was not to be included while
estimating the profits of a contractor. The Revenue sought a
reference to the Punjab & Haryana High Court on the question
whether on the facts and circumstances of the case, the
Tribunal was justified in holding that the cost of the
material supplied by the Government was not to be
(1) (1973) 92 I.T.R. 92.
20
included while estimating the profits of a contractor and
the High Court in Reference No. 38 of 1972 answered the
question against the assessee and in favour of the
Department and restored the view of the taxing authorities
by its order dated September 26, 1973 and in doing so the
yearly income tax paid by them is Rs. 70 to Rs. 80 only.
There is Bhushan Lal v. Commissioner of Income-Tax, Delhi(l)
where it had held that the cost of the materials supplied by
the military authorities was liable tc be included before
applying the flat fate to the assessees rceipts.
Civil Appeals Nos 1702 & 1703 of 1974 relate to the
assessments of M/s. Brij Bhushan Lal Ramesh Kumar for the
assessment years 1965-66 and 1966-67, the relevant
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accounting years being the ones which ended on March 31,
1965 and March 31, 1966 respectively. The assessee firm, a
M.E.S. Contractor, carried on the business of executing
works on behalf of the Government under similar M.E.S.
contracts wherein stores/materials are supplied by the
military authorities to the firm on identical terms. For the
assessment year 1965-66 the assessee filed its return
declaring an income of Rs. 18,684 and disclosing net cash
receipts from the Government at Rs. 2,63,853. Though this
income was based on books of accounts maintained by the
firm, the assessee during the course of assessment
proceedings offered that a flat rate of 9% on the cash
receipts of Rs. 2,66,853 may be applied. The Income Tax
officer did not accept the offer but applied a flat rate of
10% on Rs. 3,07,605 which included the value of the stores
supplied by the Department to the assessee with the. result
that the profits were assessed at Rs. 3,07,60 and after
allowing deprecation of Rs. 5107 the net taxable income was
determined at Rs. 25,653 which was rounded up to Rs. 25,650.
For the assessment year 1966-67 the firm declared an income
of Rs. 62414 calculated by adopting the flat rate of 10% on
the cash receipts of Rs. 6,24,144. The firm had received
stores/material of the value of Rs. 1,36,520 from the
military authorities and the Income Tax Officer after adding
the value of the stores to the cash receipts arrived at a
total receipt of Rs. 7,60,664 and by applying the flat rate
of 10% determined the taxable income at Rs. 76,070. The
assessee’s appeals for both the years to the Appellate
Assistant Commissioner were unsuccessful but in further
appeals the Appellate Tribunal by its order dated October
31, 1970 accepted the assessee’s contention and held that
the cost or the value of the stores/material supplied by
Government to the contractor was not liable to he included
while estimating the profits or income of the contractor. In
coming to this conclusion, as in the other case, the
Tribunal followed the Kerala High Court’s decision in M. P.
Alexander’s case (supra).
(1) (1971) 81 ITR 497.
21
At the instance of the Revenue two references (being Income
Tax References Nos. 2 and 3 of 1973) were made to the
Punjab & Haryana High Court and the High Court following
its earlier decision in Brij Bhushan Lal’s case (supra)
answered the questions referred to it in the negative i.e.
in favour of the Department and against the assessee. Both
the assessees have come up to this Court by special leave
challenging the view taken by the High Court.
In support of these appeals counsel for the appellants
has contended that it was well settled that even while
making a best judgment assessment the Income-Tax officer
must make an honest and fair estimate of the income of the
assessee and that having regard to the terms and conditions
of the contract (a specimen whereof was produced during the
hearing before us) and particularly the terms on which the
stores/materials were supplied by the military authorities
to the assessee for being used in the works undertaken by
the firm, it was clear that no element of profit was
embedded led in such stores/materials that were made
available to the contractor for being used in the works
entrusted lo the contractor and as such the cost or value of
such stores/material could not be added to the total cash
payments received by the contractor from the Department
under the contract for the purpose of estimating the income
or profits derived by the contractor from such contract. He
pointed out that under the terms and conditions of the
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contract such stores/material were never ’sold’ by the
Department to the contractor but the same always remained
the property of the Department and the 15 contractor had
merely handled, manipulated or used the same in the works
completed by him and the surplus of such stores/material, if
any, that remained was required to be and was actually
returned by the contractor to the Department and this being
the true nature of the supply of such stores/material, the
cost or the value thereof could not be included or added to
the total cash payment received by the contractor under the
contract for computing his income or profits From the said
contract. In support of his contention reliance was placed
upon M.P.Alexander’s case (supra), Madras High Court’s
decision in Commissioner of Income-tax Madras v. K. S.
Guruswami Gounder & K. S. Krishanaraju(l); Gujarat High
Court’s decision in Trilokchand Chunilal v. Commissioner of
Income-Tax, Gujarat(2) and Full Bench decision of the Andhra
Pradesh High Court in Additional Commissioner of Income-tax
v. Trikamji Punia & Sons(2).
on the other hand, counsel for the Revenue contended
that not only the cash payments received by the assessee
under the contract but
(1) (1973) 92 ITR 90.
(2) (1976) 107 ITR 732.
(3) (1977) 106 ITR 597.
22
also the cost of the store\material supplied by the
Department to the contractor-both together represented the
real value of the contract to the contractor and as such,
since the book results were rejected, the Taxing Authorities
and the High Court were right in coming to the conclusion
that the income or profits derived by the contractor from
such contracts was liable to be determined by applying the
flat rate to the entire value of the contract. In other
words, it was contended by him that the cost of the
stores/material supplied by the Government to the contractor
was liable to be taken into account while estimating the
income or profits of the contractor under such contract and
in that behalf he pressed for our acceptance the view of the
Punjab & Haryana High Court in Brij Bhushan Lal’s case
(supra).
At the out set it may be stated that in the case of
both the assessees their returns and book-results were
rejected on the ground that proper and reliable books of
account had not been maintained and the Income tax officer
was required to make the assessments on "best judgement"
basis. However, the principles to be followed by the lncome-
tax officer while making a best judgment assessment have
been clearly laid down by the Privy Council as also by this
Court in a number of decisions. In commissioner of Income-
Tax v. Laxminarain Badri das(1), their Lordships of the
Privy Council observed as follows:
"The officer is to make an assessment to the best
of his judgment against a person who is in default as
regards supplying information. He must not act
dishonestly or vindictively or capriciously because he
must exercise judgment in the matter. He must make what
he honestly believes to be a fair estimate of the
proper figure of assessment, an(l for this purpose he
must, their Lordships think, be able lo take into
consideration local knowledge and repute in regard to
the assessee’s circumstances, and his own knowledge of
previous returns by and assessments of the assessee,
and all other matters which he thinks will assist him
in arriving at a fair and proper estimate; and though
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there must necessarily be guesswork in the matter, it
must be honest guesswork. In that sense, too, the
assessment must be to some extent arbitrary".
Since the law relating to "best judgment assessment" is
the same both in the case of income-tax assessment and the
sales-tax assessment and the following observations of this
Court in Raghubar Mandal Harinder Mandal v. State of
Bihar,(2) a case under the Bihar Sales Tax Act, would be
material:
(1) (1937) S I.T.R. 170 (PC).
(2) (1957) 7 STC 770 at p. 778.
23
"No doubt it is true that when the returns and the
books of account are rejected, the assessing officer
must make an estimate, and to that extent he must make
a guess: but the estimate must be related to some
evidence or material and it must be something more than
mere suspicion."
Again in State of Kerala v. C. Velukutty,(l) which was
a case 1 under the Travancore-Cochin General Sales Tax Act,
Subba Rao, J. (as he then was), speaking for this Court
observed at page 244 of the report thus:
"The limits of the power are implicit in the
expression ’best of his judgment’. Judgment is a
faculty to decide matters with wisdom truly and
legally. Judgment does not depend upon the arbitrary
caprice of a judge, but on settled and invariable
principle, of justice. Though there is an element of
guesswork in a ’best judgment assessment.’ it shall not
be a wild one, but shall have a reasonable nexus to the
available material and the circumstances of each case."
It will appear clear from what has been said above that
the authority making a best judgment assessment must make an
honest and fair estimate of the income of the assessee and
though arbitrariness cannot be avoided in such estimate the
same must not be capricious but should have a reasonable
nexus to the available material and the circumstances of the
case. It is with reference to these principles that the
question raised before us will have to be considered and
looking at it from that point of view the real question is
whether the turnover represented by the cost of the
stores/material supplied by the M.E.S. Department involves
any element of profit having regard to the terms and
conditions on which such supply is made ? If it does then
cost of such stores/material will have to be taken into
account but if it does not such cost will have to be
excluded.
In order to decide the aforesaid question it will be
necessary to advert to the terms and condition of the works
contracts undertaken by the two assessee firms, which as
stated earlier, are common. The assessee firms in both the
cases are M.E.S. Works Contractor tendering and obtaining
from the M.E.S. Department what are known as ’’Lump sum
contracts which arc governed by the General Conditions of
contracts I.A.F.W. 2249 (1963 print). In addition to the
general conditions the particular work undertaken by the
contractor is also governed by special terms contained in
the Acceptance of Tender, and the specification and
Schedules annexed thereto. ’’In Lump
(1) (1966) 60 I.T.R. 239.
24
Sum Contracts" of M.E.S. Department two salient features are
always present, namely, (l) there is a Schedule ’B’ which
specifies the items of stores/material to be supplied by the
Department to ’he contractor solely for being used, fixed or
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incorporated in the works together with the fixed rates at
which the same will be supplied and such supply is governed
by General Conditions Nos. 10 and 33: apart from the
stores/material specified in Schedule ’B’ the contractor
also brings his own stores/material on site for the purposes
of the works which is also governed by some Paragraphs of
General Conditions Nos. 10 and 33: and (2) the final
financial liability of the Government is fixed on completion
of the contract on the basis of the actual measurements and
on the basis of the rates which are already standardised; a
detailed measurement is undertaken at the end of the work at
which the Garrison Engineer and the assessee’s
representative remain present and the measurements are
entered in Measurement Books and after the measurements.
final bills are prepared as per the M.E.S. Schedule and
payments are made after making adjustments for the advances
already made. With regard to stores/material Condition Nos.
10 and 33 of the General Conditions are material. Condition
No. 10 so far as is material runs thus:
"Condition 10-Stores and Materials-
The Contractor shall at his own expense, supply
all stores and materials required for the Contract,
other than those listed in Schedule ’B’ which are to be
provided by the Government by the rates detailed
therein.
.......... .... .... .... .... .... ......
.......... .... ... . ... .... .... ......
All stores and materials to be supplied by the
Contractor shall be the best of the respective kinds
described in the Specifications and the Contractor
shall upon the request of the Engineer-in-Charge
furnish him with proof to his satisfaction that the
stores and materials so comply.
....... ....... .................................
.. .. . .... . . . . . . ... . . .... .. ... . ...
In the case of stores provided under Schedule ’B’,
the Contractor shall bear the cost of loading,
transporting to site, unloading, storing under cover as
required, assembling and jointing the several parts
together as necessary and incorporating and fixing
these stores and materials in the Works, including all
preparatory work of whatever description as may
25
be required, and of closing, preparing, loading and
returning empty cases or containers to the place of
issue without any extra charge."
condition No. 33 SO far as is material runs thus:
"Condition 33-Stores and Materials on site-
Stores and materials required for the Works are to
be deposited by the Contractor only in places to be
indicated by the Engineer-in-Charge.
................... .. ...... .... ....
............... .......................
All stores and materials brought to the site shall
become and remain the property of Government and shall
not be removed off the site without the prior written
approval of the G.E. But whenever the Works are finally
completed the Contractor shall at his own expense
forthwith remove from the site all surplus stores and
materials originally supplied by him and upon such
removal, the same shall revest in and become the
property of the Contractor. All Government stores and
materials Issued to the Contractor for incorporation or
fixing in the Works and which, making due allowance tor
reasonable wear and tear and or waste, have not on
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completion of the Works been so incorporated or fixed
shall be returned by the Contractor at his own expenses
to the place of issue.
Surplus stores and/or materials returned by the
Contractor will be credited to him at a price not
exceeding that at which the said stores and materials
were originally issued to him but due consideration
shall be given to and allowance claimed by Government
in respect of ally depreciation or damage suffered by
the Stores and/or materials whilst in the custody of
the Contractor "
From the tender documents that are made available to
contractor and the aforesaid terms and conditions of the
"Lump Sum Contracts" two or three aspects emerge very
clearly. In the first place the contractor becomes aware
that certain specified stores/materials will be supplied to
him by the Department at fixed rates for being used in the
works to be undertaken by him for which he has not to pay
from his pocket and it is on that footing that he submits
his tender quoting a particular figure for the entire work;
secondly, such stores/material so supplied by the M.E.S.
Department has to be used, fixed or incorporat-
3- 817 SCI/78
26
ed by the contractor in the works undertaken by him and the
surplus, if any, that would remain after the completion of
the work is to be returned to the Department; thirdly, since
for accounting purposes the initial supply is debited to the
contractor at the specified fixed rates, credit for the
balance of the stores/materials so returned is also given at
the same rates, some adjustment being made in respect of the
wear and tear of such stores/material but in regard to the
stores/material out of such supply as is actually used,
fixed or incorporated in the works, no accounting is done
vis-a-vis the contract payment that is made to the
contractor. In other words, in substance and in reality such
stores/material always remains the property of the
Department and the contractor has merely the custody of it
and he fixes or incorporates the same into the works. It
seems to us clear that in such circumstances and having
regard to the terms and conditions on which much supply of
store/materials is made there is not even a theoretical
possibility of any element of profit being involved in the
turnover represented by the cost of such stores/material. It
is conceiveable that when the contractor himself purchases
materials in the open market and supplies the same to the
Department by using, fixing or incorporating the same in the
works, as in the case of materials other than specified in
Schedule ’B’ some profit element would be embedded in the
turnover represented by the cost of such material but when
stores/material is supplied by the Government Department at
fixed rates for being used, fixed or incorporated in the
work on terms indicated above there would be no element of
profit involved in the turnover represented by the cost of
such material. It is true that ordinarily when a works
contract is put through or completed by a contractor the
income or profits derived by the contractor from such
contract is determined on the value of the contract as a
whole and cannot be determined by considering several items
that go to form such value of the contract but in our view
where 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
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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/stores
received for being used, fixed or incorporated in the works
undertaken by them.
27
Having regard to our aforesaid conclusion the view
taken by the Punjab and Haryana High Court in Brij Bhushan
Lal’s case (supra) must be regarded as erroneous and we
approve the view taken by the Kerala High Court (M. P.
Alexander & Co. case), Madras High Court (K.S. Guruswami
Gounder’case). Gujrat high Court (Trilokchand Chunilal’s
case) and Andhra Pradesh High Court (Trikamji Punia’s case).
In the result the appeals are allowed, the impugned
orders of the High Court are set aside and those of the
Appellate Tribunal are restored. The Revenue will pay the
costs of the appeals to the assessee firms.
S.R. Appeals allowed.
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