COMMISSIONER OF INCOME TAX Vs. SIMON CARVES LTD

JUDGEMENT

(1.) Pursuant to the directions of this court under Section 256(2) of the Income-tax Act, 1961, the Tribunal has referred the following questions of law relating to the assessment years 1964-65 and 1965-66 :

(2.) Shortly stated, the facts are that the assessee is a company which is a "non-resident". The "previous year" is the financial year preceding the relevant assessment year. The assessee is a member of the Iscon Consortium. The consortium had taken contracts for construction work from M/s. Hindusthan Steel Ltd. Apart from the contracts given to the Consortium, the assessee, in its individual capacity, was given contracts by the Hindusthan Steel Ltd. in their 1.6 million " expansion " programme. In the appeals before the Tribunal, the only contracts which fell for consideration, whether given by the Hindusthan Steel or others, were those awarded to the assessee in its individual capacity. The accounts of the assessee are, made up on completed contract basis and thus the income resulting from completed contracts alone was offered for assessment in each year. Most of the contracts undertaken by the assessee had a rupee portion and a sterling portion. The method of computing the income in respect of completed contracts, as adopted by the Income-tax Officer in respect of the rupee portion, was to deduct from the rupee portion, the prime cost which gave the gross profit, and thereafter, the rupee overheads, which gave the net profit or loss. Regarding the sterling portion of the contract, 20 per cent. of the sterling profits was estimated to accrue in the taxable territories and was included in the total income.

(3.) For the assessment year 1964-65, the assessment was made on a total income of Rs. 13,75,757, of which Rs. 13,05,258 was income from "business ", Rs. 15,001 income from "other source " (technical service fees, etc.) and Rs. 55,498 represented " capital gains ",