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1986 DIGILAW 167 (PAT)

Commissioner Of Income Tax v. Azad Builders

1986-05-07

ASHWINI KUMAR SINHA, UDAY SINHA

body1986
Judgment 1. The question referred to us for our opinion in this reference under Section 256(2) of the Income-tax Act, 1961, is as follows : "Whether, on the facts and in the circumstances of the case, the Tribunal were justified in law in holding that the value of the materials supplied to the assessee in the execution of the contract work should be excluded from the gross receipts in determining the net profit by application of rate ?" 2. This question relates to the assessment year 1971-72. This very question had been referred to us in Taxation Case No. 82 of 1975 [CIT V/s. Azad Builders (No. 1)--[1986] 162 ITR 643 (Pat)] which related to the assessment year 1970-71 of this very contractor (assessee). We laid down the law in that case and remanded it to the Tribunal for reconsideration of the matter. In that case, we laid down that the Tribunal had not considered the case from the appropriate angle of law. The established law now is that in the case of works contracts, if the contractor has exclusive control over the materials supplied by the Department, then the profit must be calculated on the basis of the gross receipts. If, on the other hand, the Department is in exclusive control of the materials supplied to the contractor (assessee), the rate of profit must be calculated on the basis of the net receipt of the assessee. In the instant case, as in Taxation Case No. 82 of 1975 ([1986] 162 ITR 643), the matter has not been enquired into with an eye on the law laid down by us. In that view of the matter, this reference also must be remanded to the Tribunal for reconsidering the entire matter with an eye on the law laid down by us in Taxation Case No. 82 of 1975 ([1986] 162 ITR 643) which was disposed of on February 25, 1986 by following the previous decision in Brij Bhushan Lal Pardwnan Kumar V/s. CIT [1978] 115 ITR 524 (SC) and the decision of this court in Ramesh Chandra Chaturvedi V/s. CIT [1980] 121 ITR 116. 3. We, therefore, refuse to answer the question referred to us and remand the case to the Tribunal for disposal according to law. There shall be no order as to costs. 4. 3. We, therefore, refuse to answer the question referred to us and remand the case to the Tribunal for disposal according to law. There shall be no order as to costs. 4. Let a copy of this judgment be transmitted to the Income-tax Appellate Tribunal in terms of Sec.260 of the Income-tax Act, 1961.