D.K. Kapur, J.
1. The question of law referred to us for the assessment years 1968-69 and 1969-70 is as follows :
'Whether, on the facts and in the circumstances of the case, the Tribunal was justified in confirming the inclusion of the cost of materials supplied by the M. E. S. authorities to the assessed-firm in the assessed's total receipts and applying a net rate of profit at 10% on the total receipts for the purposes of computing the assessed's income for the assessment years 1968-69 and 1969-70 ?'
2. Learned counsel for the assessed stated that the question of law had to be answered in favor of the assessed because the point was now covered by the judgment of the Supreme Court in Brij Bhushan Lal Parduman Kumar v. CIT : 115ITR524(SC) . He pointed out that the Tribunal had followed the judgment of the Punjab and Haryana High Court reported as Brij Bhushan Lal v. CIT , which was now overruled by the Supreme Court's judgment. We have examined the two judgments. We find that they are all cases of M.E.S. contracts in which materials had been supplied by the Government at fixed rates to be incorporated in the contract or returned. The case of the assessed was of the same type. It was also the contention of the assessed in the present case that the cost of materials supplied by the M.E.S. authorities for use in the construction should not be utilised for determining the income.
3. Learned counsel for the Department urged that the cases were all distinguishable as in the present case, the materials supplied by the M.E.S. Department had been sold to the assessed. We find that that was the case also in the three appeals before the Supreme Court. There also the material had been sold to the assessed for incorporation in the contract but there was a term that any surplus material left over would be returned. Counsel for the Department urged that there is no such term in the present contract, but there is nothing to show this before us. As these are all M.E.S. contracts, we find it impossible to distinguish the Supreme Court's judgment.
4. Furthermore, we find that when the assessed received payment for the contract, the price of the material supplied was deducted. It, thereforee, appears that the receipts from the contract as received from the Government were the cost of the work minus the material. That was the position also in the case before the Punjab and Haryana High Court and before the Supreme Court. An attempt was made to point out certain other judgments on the ground that they differed from the Supreme Court's view. Those judgments are N. K. Sengupta v. CIT : 113ITR413(Cal) , decided by the Calcutta High Court, New India Corporation Co. v. CIT : 120ITR763(Cal) , decided by the Calcutta High Court, CIT v. Civil Engineering Co. : 136ITR38(All) , decided by the Allahabad High Court and Ramesh Chandra Chaturvedi v. CIT : 121ITR116(Patna) , decided by the Patna High Court. None of these judgments have noted that the Supreme Court had dealt with the matter in Brij Bhushan Lal Parduman Kumar v. CIT : 115ITR524(SC) . In these four cases, M.E.S. Contracts were not involved, but they were cases in which the contractor had received material from either Government or other authorities. A distinction was made between the cases where the material was to be incorporated in the contract works and that in which the material was incidentally supplied to the contractor, the basis of the argument being that if the material was to be supplied and used in the contract, then there could be no profit involved in respect of that material in estimating the tender or contract price. As noted in these cases, the facts may differ in different cases. In our view, these judgments do not differ from the Supreme Court's view and if they do, they were impliedly overruled by the Supreme Court.
5. In the present case, we are dealing with an M.E.S. contractor, where it appears that the Government had supplied some material for incorporation in the works at a fixed price, which was adjustable against the contract. In such a case, the tender price would not include any profit on the material supplied by the Government itself as it was incorporated in the works. It clearly appears that this case is fully covered by the judgment of the Supreme Court. Hence, we answer the question referred to us in the negative, in favor of the assessed and against the Department. Parties to bear their own costs as it is a covered case.