COMMISSIONER OF INCOME TAX Vs. SHARMA AND COMPANY

JUDGEMENT

(1.) THIS is a reference made at the instance of the Commissioner of Income-tax, Rajasthan, Jaipur, and the following question of law has been referred to us by the Income-tax Appellate Tribunal, Jaipur Bench, as arising out of its order dated August 21, 1971:

(2.) THE assessee is a building contractor and had executed four works worth Rs. 8,84,219 on behalf of M.E.S., Delhi, during the preceding year relevant to the assessment year 1966-67. THE ITO applied the net profit rate of 12% to his turnover, while assessing tax for the assessment year 1966-67. On appeal, the AAC applied the net profit rate of 10%. When the matter went in second appeal before the Income-tax Appellate Tribunal (hereinafter referred to as "the Tribunal"), the assessee raised the question that no amount of profit should be calculated on the value of the material supplied to him by the M.E.S. department for the execution of the works in question. THE Tribunal while upholding the 10% profit rate by its order dated August 21, 1971, also accepted the contention advanced on behalf of the assessee that there was no possibility of any profit accruing to the assessee on the value of the material which was supplied by the M.E.S. department to the contractor for execution of the works when such material was claimed to have been utilised wholly on those works. As such, the value of such materials was excluded by the Tribunal from the calculation of the turnover of the assessee. THE Commissioner of Income-tax applied to the Tribunal for making a reference to this court under Section 256 of the I.T. Act, 1961, and thus the question of law quoted above has been referred by the Tribunal to this court.