Works contract profit computation turns on control of materials; Tribunal must reassess gross versus net receipts.

In a works contract, profit computation depends on control over the materials used: where the contractor has exclusive control, profit is computed on gross receipts; where the department retains exclusive control over materials supplied, profit is computed on net receipts. The Tribunal had not examined the assessment on that legal footing, so the reference could not be answered on the existing record. The matter was therefore sent back to the Tribunal for reconsideration and disposal according to law.

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Issues: Whether, in computing profit in a works contract, the value of materials supplied by the department was to be excluded from gross receipts, and whether the matter required reconsideration by the Tribunal in the light of the earlier law laid down.

Analysis: The reference concerned the assessment year 1971-72. The Court reiterated the governing principle that where the contractor has exclusive control over the materials, profit is to be computed on gross receipts, whereas if the department retains exclusive control over the materials supplied, profit is to be computed on net receipts. As the Tribunal had not examined the matter on that legal footing, the reference could not be answered finally on the existing record.

Outcome: The question was left unanswered and the case was remanded to the Tribunal for disposal according to law.

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