Case: Sree Meenakshi Mills Limited Vs. Their Workmen

definitely not have to be paid by them. We are, therefore, satisfied that the grievance made by the appellants against the order passed by the appellate tribunal on the ground that it suffers from a mistake apparent on the face of the record is not well-founded.15. It would now be necessary to refer briefly to the decisions of industrial Courts. to which our attention has been drawn by the learned counsel for the appellants. In Model Mills etc. Textile Mills Nagpur v. Rashtriya Mill Mazdoor Sangh, 1955-1 Lab LJ 534 (LATI - Bom) (E), the implications of the Full Bench formula for ascertainment of bonus have been explained. It is observed that"the formula did not purport to direct what a concern should do or should not do with its own moneys. In evolving the formula the rights and liabilities of the parties inter se in notional satisfaction of their legitimate claims as two co-operating units in the venture were tried to be equated. Opinions might differ as to the weightage to be attached to the various components consisting the formula. But the formula has to be taken as a whole in order that an equitable balance between the rights of capital and labour might be achieved for the ascertainment of bonus."16. It may incidentially be pointed out that this decision recognizes that income-tax calculated on the trading profits for the year must be deducted as a prior charge from the profits even though exemption under the Income-tax Act is granted for the year in question taking into consideration the past years losses. The same view has been expressed by the appellant tribunal in Mahalaxmi Woollen Mills Ltd. v. Their Workmen, 1956-1 Lab LJ 305 (LATI - Bom) (F). In this case, it has been held that "even if a concern is allowed exemption from the levy of income-tax because of prior losses or unabsorbed depreciations, etc., that by itself is no ground for preventing the concern from claiming the amount of income-tax it would have been liable to pay if the profits made in the relevant year alone had been taken into account. Hence, in calculating the amount of available surplus, the amount of income-tax payable for that trading year is to be deducted irrespective of the fact whether the company in fact pays tax for the year or not."Similarly in Bennett Coleman and Co. Ltd. v. Their Workmen, 1955-2 Lab LJ 60 (LATI - Bom) (G), the Labour Appellate Tribunal has held that"unabsorbed depreciation and loss incurred during prior years are allowed under S. 24 (2) of the Income-tax Act to be adjusted against the profits of a future year. Where the company claims either to adjust this amount against gross profits or to deduct such amount of income-tax as would be payable on the profits if the said two items are not to be adjusted, labour cannot be permitted to refuse relief resting on unabsorbed loss and depreciation and at the same time try to get benefit for itself by refusing provision for tax resting on those very items which are permitting to be adjusted by the income-tax authorities which will result in reduced income-tax or no tax at all."It would thus appear from the decisions cited before us that industrial tribunals have consistently taken the view that income-tax calculated on the trading profits for the relevant year must be deducted as a prior charge from the gross profits even though the employer may be entitled to claim exemption under the Income-tax Act in view of the fact that he had suffered losses during the previous year. Prima facie it may be said that, if the essential basis for deciding the workmens claim for bonus in a given year is the existence of the net surplus available for that year, it may not be permissible to question the propriety for the provision for income-tax made by the employer solely on the ground that in view of his previous years losses he may not be called upon to pay income-tax during the year in question. After all, in this connection the calculations are made by reference to the financial position of the employer during the particular year only and in these calculations considerations relevant under the Income-tax Act in regard to the financial losses of the employer in the previous year would not be allowed to enter. However, in the present appeals we are not called upto to consider the correctness of the view taken by the Appellate Tribunal in these cases and so we need not pursue the matter and further.17. Mr. Viswanatha Sastri has strongly on two labour decisions reported in B. E. S. T. Workers Union v. Bombay Suburban Electric Supply Ltd. 1957-2 Lab LJ 112 (LATI - Bom) (H), and Greaves Cotton and Crompton Parkinson, Ltd. v. Its Workmen, 1956-1 Lab LJ 486 (LATI - Bom) (I). These two decisions no doubt support the appellants arguments before us but, for the reasons which we have already given, we must hold that these decisions are not sound or correct.18. The last case to which our attention has been drawn by Mr. Viswanatha Sastri is the decision of the Labour Appellate Tribunal in Bengal Chemical and Pharmaceutical Works, Ltd. v. Their Workmen, (1954-55) 6 FJR 590 (LATI) (J). This case decides that "in providing for income-tax the tax payable by the concern on its income earned in the year for which bonus is claimed must be ascertained. The amount of income-tax actually paid during the year which is the tax of the income of the previous year should not be taken into account." In this case, the tribunal has observed that "for the purpose of ascertaining the income-tax which may be payable by the employer for the year in question, the figures appearing on the expenditure side of the profit and loss account of that year have to be marshalled and examined". This case is not of much help in deciding the point which we are concerned.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]10. This question has been decided by a Full Bench of the Labour Appellate Tribunal in U. P. Electric Supply Co. Ltd. v. Their Workmen, 1955 Lab AC 659 (Bom) (C). It is true that the question of bonus had to be considered in this case in the light of the provisions of the U.P. Electricity (Supply) Act, 1948. Nevertheless the Full Bench has dealt with this matter on general considerations and has set at rest the divergence of views expressed by different Benches of the tribunal on this point. According to this decisions, the initial depreciation and additional depreciation are in a sense abnormal additions to thedepreciation and they are designed to meet particulars contingencies and for a limited period. It would, therefore, not be fair to the workmen that these two depreciations are rated as prior charges before the available surplus is ascertained. It is likely that, in many cases, if these two depreciations are allowed as prior charges no surplus would be left even though workmen have laboured during the year to the best of their ability and the concern was for all purposes prosperous.In other words, according to this decision, considerations on which the grant of additional depreciation may be justified under theAct are different from considerations of social justice and fair apportionment on which the original Full Bench formula in regard to the payment of bonus to the workmen is based. That is why, in the result, this subsequent Full Bench held that only normal depreciation including multiple shift depreciation, but not initial or additional depreciation, should rank as prior charge in applying the Full Bench formula as to the payment of bonus. If it cannot be disputed that in industrial adjudication it is not obligatory to adopt the very same procedure as prescribed by theAct for ascertaining gross profits and then determining the amount of net surplus available, it is not easy to accept the appellants argument that in respect of depreciation alone industrial tribunals must necessarily and in every case follow the relevant provisions of theAct. If that be the true position, then we see no reason why, in respect of one item of debit only the technical provisions of theAct must be followed in industrial adjudications in respect of workmens claim for bonus.On the whole the reasons given by the appellate tribunal in the case of 1955 Lab AC 659 (FB) (Bom) (C), appear to us to be satisfactory; and so we are not prepared to accept the appellants argument that the appellate tribunal in the present case has erred in law in not allowing the appellants claim for initial and additional depreciations. In our opinion, therefore, the main point urged by the appellants in Appeals Nos. 218 and 219 of 1956 cannot succeed.That takes us to the two other points raised by the appellants in Appeal No. 217 of 1956. The first point which has been raised in this appeal by the appellants is about the jurisdiction of the appellate tribunal to review its own orders in appropriate cases under Order 47 of the Code of Civil Procedure.This Court has recently had occasion to consider the question about the applicability of the Code of Civil Procedure to the proceedings before the Labour, Appellate Tribunal in M/s. Martin Burn Ltd. v. R. N. Benerjee, C. A. No. 92 of 1957 : (AIR 1958 SC 79  ) (D). Section 9(1) and S. 10 of the Industrial Disputes (Appellate Tribunal) Act, 1950 as well as the relevant rules and orders framed under the Act were considered and it was held that the Code of the Civil Procedure applies to the proceedings before the appellate tribunal with the result that the appellate tribunal can exercise its powers under O. 41, R. 21 as well as under S. 151 of the Code. It is true that in this case there was no occasion to consider the applicability of the provisions of O. 47 of the Code but that does not make any difference.If the Code of Civil Procedure applies to the proceedings before the Labour Appellate Tribunal, it is clear that the provisions of O. 47 would apply to these proceedings as much as S. 151 of the Code or the provisions of O. 41. We must accordingly hold that the appellate tribunal erred in law in coming to the conclusion that it had no jurisdiction to review its own order under the provisions of O. 47 of the Code.On the other hand, it appears from the judgment of the appellant tribunal that this point was not raised by the appellants before it in their arguments. No grievance was made and no higher amount was claimed by them to be reserved for taxation. The appellate tribunal has also observed that the point raised by the appellants in their review petition did not show that any new and important matter had been discovered which, after the exercise of due diligence, would not have been discovered by the parties at the time of the hearing of the appeal. Besides, the appellate tribunal also held that there was no mistake apparent on the face of the record. Technically there may be some force in the observations made by the appellate tribunal; but we cannot overlook the fact that a written statement had been filed before the appellate tribunal expressly and specifically raising this point. That is why we propose to deal with the merits of the argument and not to reject it on the ground that this argument had not been urged at the properthink it is not open to the appellants to contend that though for the amounts covered by the normal and additional depreciations they would not be required to paynevertheless they should be allowed to provide for the payment ofin respect of these two items merely on the ground that they are disallowed by the industrial tribunal and have thus added to the total of gross profits as determine by the tribunal.The adequacy or otherwise of the provision formust necessarily be judged in the light of theAct since it is under the said Act that the liability to pay tax would ultimately be determined.Besides, if the appellants argument is accepted and an amount nationally payable by way ofin respect of disallowed items of depreciation is added to the estimated amount ofprovided by the appellants, the very object of disallowing the two items of depreciation would be substantially defeated. On the other hand, the rejection of the appellants argument would not mean any hardship because the additional amount sought to be added by them in the provision forwould definitely not have to be paid by them. We are, therefore, satisfied that the grievance made by the appellants against the order passed by the appellate tribunal on the ground that it suffers from a mistake apparent on the face of the record is notwould thus appear from the decisions cited before us that industrial tribunals have consistently taken the view thatcalculated on the trading profits for the relevant year must be deducted as a prior charge from the gross profits even though the employer may be entitled to claim exemption under theAct in view of the fact that he had suffered losses during the previous year. Prima facie it may be said that, if the essential basis for deciding the workmens claim for bonus in a given year is the existence of the net surplus available for that year, it may not be permissible to question the propriety for the provision formade by the employer solely on the ground that in view of his previous years losses he may not be called upon to payduring the year in question. After all, in this connection the calculations are made by reference to the financial position of the employer during the particular year only and in these calculations considerations relevant under theAct in regard to the financial losses of the employer in the previous year would not be allowed to enter. However, in the present appeals we are not called upto to consider the correctness of the view taken by the Appellate Tribunal in these cases and so we need not pursue the matter and further.17.Mr. Viswanatha Sastri has strongly on two labour decisions reported in B. E. S. T. Workers Union v. Bombay Suburban Electric Supply Ltd.Lab LJ 112 (LATIBom) (H), and Greaves Cotton and Crompton Parkinson, Ltd. v. Its Workmen,Lab LJ 486 (LATIBom) (I). These two decisions no doubt support the appellants arguments before us but, for the reasons which we have already given, we must hold that these decisions are not sound or correct.The last case to which our attention has been drawn by Mr. Viswanatha Sastri is the decision of the Labour Appellate Tribunal in Bengal Chemical and Pharmaceutical Works, Ltd. v. Their Workmen,6 FJR 590 (LATI) (J).This case decides that "in providing forthe tax payable by the concern on its income earned in the year for which bonus is claimed must be ascertained. The amount ofactually paid during the year which is the tax of the income of the previous year should not be taken into account." In this case, the tribunal has observed that "for the purpose of ascertaining thewhich may be payable by the employer for the year in question, the figures appearing on the expenditure side of the profit and loss account of that year have to be marshalled and examined". This case is not of much help in deciding the point which we are concerned.