GIRDHARILAL AND COMPANY Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THE Income-tax Appellate Tribunal was directed vide order dated April 4, 1979, to refer the following two questions of law arising out of its order dated December 29, 1973 :

(2.) THE facts of the case are that the assessee received gross payments of Rs. 19,74,903 from Hindustan Copper Ltd., Khetri, and Rs. 2,15,726 from Instrumentation Ltd., Kota, for the works done for them. THE payments of Rs. 19,74,903 were made up as under : <FRM>Judgement_510_ITR230_19981.HTM</FRM>

(3.) IN appeal before the INcome-tax Appellate Tribunal the assessee was aggrieved against the order of the Appellate Assistant Commissioner sustaining the inclusion of receipts aggregating to Rs. 3,76,950 and the Revenue was aggrieved against the reduction of the security amount of Rs. 1,85,932. The Tribunal observed that the receipts by way of adjustment of raw material as well as security deposits were to be included in the gross receipts for the purpose of estimation of profits. The decisions in the cases of M.P. Alexander and Co. v. CIT, 1973 92 ITR 92 (Appex) CIT v. K.S. Guruswami Gounder and K.S. Krishnaraju, 1973 92 ITR 90, Brij Bushan Lal v. CIT, 1971 81 ITR 497, and V.D. Rajara-thanam v. CIT, [1968] 68 ITR 19 (AP), were taken into consideration and it was found that the responsibility of supplying the material was on the contractor. They could purchase it from the market as well as from the Department at controlled prices. Since the purchase from the Department involve many advantages, the amount which has been deducted by the Department concerned from its bills could not be reduced. It was also observed that it was not shown while formulating their rates at the time of submission of tender, the assessee was influenced by any undertaking given by the corporation. The schedule of issue of material to the contractor makes it very clear that the corporation had agreed to supply cement and steel only in case they were available and for that purpose indent of 7 days was to be submitted in advance. If the cement and M. S. bars were not available in the central stores of the corporation, the corporation could have expressed its inability to supply the same and in that eventuality it was incumbent on the contractor to make its own arrangement. Since no funds were blocked and the assessee was relieved of the botheration of purchasing it in the market and transporting it to the work site it was considered that the tax is to be charged on the gross amount without deducting the adjustment made.