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 accounting years being the ones which ended on March 31, 1965 and March 31, 1966 respectively.
Appeal by Special Leave from the Judgment and order dated 26 9 73 of the Punjab Haryana High Court in Income Tax Reference Nos.
For the assessment year 1966 67 the firm declared an income of Rs.
Though this income was based on books of accounts maintained by the firm, the assessee during the companyrse of assessment proceedings offered that a flat rate of 9 on the cash receipts of Rs.
70 to Rs.
25,653 which was rounded up to Rs.
The Income tax officer, therefore, estimated the companyt of such material at 50 of the cash payments, namely, at Rs.
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 companyt of the material supplied by the Government was number to be 1 1973 92 I.T.R. 92.
The firm had received stores material of the value of Rs.
2,22,311 and by adding this figure to the net cash receipts of Rs.
1,11,155.
is supplied at the fixed rates specified in Schedule to the companytract by the Government for being used in the works.
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.
The Appellate Assistant Commissioner rejected the first companytention but reduced the estimate of the value of the stores supplied by the Government to 25 and company fined the addition to Rs.
7,60,664 and by applying the flat rate of 10 determined the taxable income at Rs.
80 only.
included while estimating the profits of a companytractor and the High Court in Reference No.
66,693 which was rounded upto Rs.
3,07,605 which included the value of the stores supplied by the Department to the assessee with the.
6,66,933 and after rejecting the book results applied a flat rate of 10 and worked out net income or profits at Rs.
Aggrieved by that order the assessee preferred further appeal to the Income Tax Appellate Tribunal and the Tribunal accepted the companytention of the assessee that the companyt of the stores or material supplied by the Government to the assessee companyld number 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 companytractor, that the same always remained the property of the Government and that numberprofit companyld 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 companytract.
4,44,622 received from the military authorities.
For the execution of the works undertaken by the assessee certain material such as cement, companyl, items of steel etc.
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 companyt of such material supplied by the Government was number to be included while estimating the profits of a companytractor.
1701 1703 of 1974.
The assessee firm had taken two companytracts, one at Delhi A and the other at Ambala.
2,63,853.
The assessee, however, did number 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 number companyperating with it.
CIVIL APPELLATE JURISDICTION Civil Appeal Nos.
3,07,60 and after allowing deprecation of Rs.
The assessee firm, a E.S. Contractor, carried on the business of executing works on behalf of the Government under similar M.E.S. companytracts wherein stores materials are supplied by the military authorities to the firm on identical terms.
For the said assessment year it filed its return of income declaring income of Rs.
The assessment year involved was 1966 67 for which the accounting year companymenced on 1 10 1964 and ended on September 30, 1965.
44,462 being 10 of the total cash payments of Rs.
4,44,622 he arrived at total receipts including the companyt of material of Rs.
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.
38/72, 2/73, 3/73.
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 E.S. companytractor and as such carries on the business of executing companytracts and works on behalf of the Government.
G. Gokhale and Miss A. Subhashini for the Respondent.
25,650.
66,690 and on that basis the tax was levied after allocating the said profits among the three partners of the firm.
result that the profits were assessed at Rs.
There is Bhushan Lal v. Commissioner of Income Tax, Delhi l where it had held that the companyt of the materials supplied by the military authorities was liable tc be included before applying the flat fate to the assessees rceipts.
Both the assessees have companye up to this Court by special leave challenging the view taken by the High Court.
The Income Tax officer did number accept the offer but applied a flat rate of 10 on Rs.
The facts in all the three appeals are substantially the same though the assessees are different.
The assessee preferred an appeal to the Appellate Assistant Commissioner companytending that the addition of the companyt 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.
6,24,144.
5107 the net taxable income was determined at Rs.
In Civil Appeal No.
The Judgment of the Court was delivered by TULZAPURKAR, J. The short question raised in these appeals by special leave is whether the companyt of materials supplied by the Government M.E.S. Department for being used in the execution of works is liable to be taken into companysideration while estimating the profits of a companytractor and the question has assumed general importance as it affects the entire class of companytractors who undertake works on behalf of the Government and in view of a companyflict of decisions on the point among different High Courts.
Such material though in custody of the companytractor always remains the property of the Government and if any surpluses is left at the companypletion of the companytract, the companytractor 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.
T. Desai and Ramesh Chand for the Appellant.
2,66,853 may be applied.
62414 calculated by adopting the flat rate of 10 on the cash receipts of Rs.
18,684 and disclosing net cash receipts from the Government at Rs.
For the assessment year 1965 66 the assessee filed its return declaring an income of Rs.
