TaxTMI Login
Just a moment...
Press 'Enter' to add multiple search terms. Rules for Better Search
When case Id is present, search is done only for this
of 
of 
No Folders have been created
Are you sure you want to delete "My most important" ?
NOTE:
of of 
All Case Laws
of of All Case Laws
Note
Bookmark
Share
Don't have an account? Register Here
of <h1>Court allows deduction of material costs for profit calculation for works contractors.</h1> <h3>Srichand Agarwala Versus Commissioner Of Income-Tax, Orissa</h3> Srichand Agarwala Versus Commissioner Of Income-Tax, Orissa - [1984] 148 ITR 34, 41 CTR 300, 19 TAXMANN 492 Issues:Interpretation of the Income Tax Act regarding the determination of profits for works contractors based on gross payment received, deduction of material costs, and estimation of profits.Whether the cost of materials supplied by the contractee should be deducted from the gross payment for calculating profits on a percentage basis.Analysis:The case involved a works contractor engaged in construction activities, where the petitioner received a gross bill amount but had certain material costs deducted by the contractee. The petitioner contended that the deducted material costs should be considered for determining profits. The Income Tax Officer (ITO) and the Appellate Authority did not allow this deduction, leading to an appeal to the Income-tax Appellate Tribunal and ultimately a reference to the High Court under section 256(2) of the Income Tax Act, 1961.The primary issue before the court was whether the petitioner was entitled to deduct the cost of materials supplied by the contractee from the gross receipt for calculating profits. The petitioner relied on a Supreme Court decision to support their claim, emphasizing that if no profit was derived from the materials supplied, the income or profits from the contract should be determined based on the value of the contract minus the cost of such materials. The court agreed with this interpretation and held that the petitioner should be allowed to deduct the cost of materials supplied by the contractee from the gross receipt, thereby impacting the calculation of profits.In light of the legal precedent and the specific circumstances of the case where materials were supplied by the contractee and their cost was deducted, the High Court ruled in favor of the assessee, allowing the deduction of material costs from the gross receipt to determine profits. The judgment was unanimous, with both judges concurring on the decision. Consequently, the court answered the reference question in favor of the assessee, highlighting the entitlement to deduct material costs from the gross payment for profit calculation purposes.
TaxTMI 