Contract turnover excludes Government-supplied materials when estimating profit under fixed-rate supply terms.

Where the Government supplied cement and other materials at fixed rates under the contract, their value could not be treated as the assessee's own contract turnover for estimating profit. The assessee earned no profit on the cost of those Government-supplied materials, as the contract terms supported that position and the estimating authority's assumption was misplaced. The addition made by applying estimated profit to the value of such materials was therefore not justified and was deleted in favour of the assessee.

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Issues: Whether profit could be estimated on the value of materials supplied by the Government to the assessee for execution of contract works.

Analysis: The assessee had tendered on the basis that cement and certain other materials would be supplied by the Government at fixed rates, and the contract terms supported that position. On those facts, the value of such materials could not be treated as part of the assessee's own contract turnover for the purpose of estimating profit. The material supplied by the Government was not a receipt on which the assessee earned profit in the manner assumed by the assessing authority.

Conclusion: The addition made by estimating profit on the cost of Government-supplied materials was not justified and was deleted in favour of the assessee.

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