Estimated contractor turnover cannot include Government-supplied material cost absent evidence of profit element.

In an estimated assessment of a contractor, the cost of materials supplied by the Government could not be included in turnover for applying the profit rate because there was no evidentiary basis to treat those materials as a profit-making component. The court noted that the assumption of profit from such supplies was conjectural, while the available certificates showed profit was computed only on labour charges and not on departmental materials. On the facts, inclusion of the Government-supplied material cost in turnover was unsupported by evidence and therefore not justified in law.

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Issues: Whether, in estimating the contractor's income, the cost of materials supplied by the Government under the contract could be included in the turnover on which the profit rate was applied.

Analysis: The estimate had been made by applying a percentage to the gross turnover on the footing that the cost of materials supplied by the Government itself contributed to the assessee's profit. The Court found no material to support that assumption. The tribunal's reasoning proceeded on conjecture that profit could arise from the supply of materials, whereas the available certificates showed that profit was calculated only on labour charges and not on the cost of departmental materials. On the facts, the materials supplied by the Government did not represent a profit-making component for the assessee, and the inclusion of those amounts in the turnover was unsupported by evidence.

Conclusion: The inclusion of the cost of Government-supplied materials in the turnover was not justified in law, and the answer to the referred question was in favour of the assessee.

Ratio Decidendi: An estimated assessment cannot include a receipt as part of turnover unless there is material to show that it represents a profit element of the assessee's business.

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