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Section 145, read with section 28(i), of the Income-tax Act, 1961 - Method of accounting - Work contracts - Whether in case of contractor before estimating profits it has to be determined whether control of materials supplied by Government was with assessee or with Government - Held, yes Facts During the previous year relevant to the assessment year in question, the assessee-firm was paid certain amount towards the works executed on contract for one H. The AAC divided the amount paid to the assessee under two categories. First was the value of materials supplied by H to the assessee. In the balance amount, the AAC had taken 12½ per cent as profit of the assessee. In regard to the value of materials supplied by H, the AAC assessed profit at the rate of 5 per cent. The Tribunal upheld the AAC's order. On reference : Held It was held by this Court in Ramesh Chandra Chaturvedi v. CIT [1980] 121 ITR 116 that there could not be any hard and fast rule to determine the question as to whether the value of the materials should or should not be added to the gross turnover of the assessee, who is a contractor, for determining his net profits. It all depends upon manner in which the materials has to be used in the execution of the contract. Thus, although the contract document might be showing that the materials always remained the property of the department, yet in actual practice it might not be so and, therefore, the department has to consider whether as a fact the contractor has control over the materials or the department has the control. The matter has to be examined in that light. The matter was, therefore, remanded back to the Tribunal to reconsider and decide in the light of the above principle. Cases referred to Brij Bhushan Lal Parduman Kumar v. CIT [1978] 115 ITR 524 (SC), Ramesh Chandra Chaturvedi v. CIT [1980] 121 ITR 116 (Pat.),CIT v. Azad Builders (No. 1) [1986] 162 ITR 643 (Pat.) and CIT v. Azad Builders (No. 2) [1986] 162 ITR 647 (Pat.). Rameshwar Prasad (No. 2), Amrendra Kumar Sinha and Amarnath Jha for the Applicant. B.P. Rajgarhia and S.K. Sharan for the Respondent. JUDGMENT 1. This is a reference under section 256(1) of the Income-tax Act, 1961 ('the…

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