Case: Employers In Relation To The Management Ofindian Cable Co Vs. Their Workmen

second item, which according to the Unions should have been added back is the sum of Rs. 65, 764 which was claimed as extra shift allowance of plants and machinery added during the year. The consideration of this claim was postponed by the Income-tax Officer on the ground that the Company had not furnished the requisite particulars. The Company claimed a sum of Rs. 36, 10, 594 as depreciation allowable under s. 32(1) of the Income-tax Act. According to the Unions, as the sum of Rs. 65, 764 has not been accepted by the Income-tax Officer, the Company can claim depreciation only in the sum of Rs. 35, 44, 830. The Tribunal did not accept this contention of the Unions on the ground that the amount of Rs. 65, 764 has not been disallowed by the Income-tax Officer. It is now stated in an affidavit filed in this Court on March 23, 1972 by the Chief Financial Accountant of the Company that the Company has filed an appeal against the order of the Income-tax Officer refusing to allow Rs. 65, 764 as extra shift allowance for the year 1965-66. In our opinion, the rejection of the Unions contention in this regard by the Tribunal is justified. It is seen that the Company has produced figures for depreciation and that has not been subjected to any serious challenge by the Unions. Hence the objection regarding extra shift allowance has also to be rejected in view of the decision of this Court, in Jabalpur Bijlighar Karamchari Panchayat v. The Jabalpur Electric Supply Co. Ltd. and another. (A.I.R. 1972 S.C.70) 22. The third item objected to by the Unions related to the expenditure shown by the Company for repairs and renewals. According to the Unions the expenses shown are very heavy and large and that the Company was not justified in incurring the same. In our opinion, this contention also has been properly rejected by the Tribunal. Apart from the fact that the Unions are not technically entitled to raise this objection, as they have not pleaded the same in their statement of case filed before this Court, this contention can be rejected even on merits. The Unions had furnished interrogatories requiring the Company to furnish certain particulars. Mr. R. N. Gupta, the Chief Financial Accountant of the Company filed an affidavit before the Tribunal giving answers to the interrogatories. He had categorically given details as to how the amount of Rs. 12.94 lakhs has been incurred as expenses for repairs and renewal. Mr . Gupta had also given evidence about this matter. In cross-examination he had stated that all the vouchers for repairs and renewal were scrutinised by the auditors and this evidence has been accepted by the Tribunal. Therefore, the Tribunal was justified in rejecting this claim of the Unions. 23. The last item relates to the claim made by the Unions that after distribution of bonus at 20% for the year 1964-65, there must have been a surplus and it. should have been set on for the next year, namely, 1965-66. This amount so set on should be taken into account for computing bonus for the year 1965-66. This assertion made on behalf of the Unions was controverted by the Company on the ground that there was no surplus left after paying, the maximum 20% bonus for the accounting year 1964-65. In fact the evidence of Mr. Gupta shows that apart from there not having been any surplus, the Company Raid 20% bonus merely because they had already announced that they will pay the same. It is clear from his evidence that bon- us at 20% could not have been declared for the year 1964-65 and in order to honour the declaration made by the Company, bonus was paid at that percentage. This evidence of Mr. Gupta has been, in our opinion, rightly accepted by the Tribunal. No evidence contra has been adduced by the Unions. Once the evidence of Mr. Gupta is accepted, it is: clear that there was no surplus after paying bonus for 1964- 65. Therefore, the question of set on does not arise. This plea of the Unions also has to be rejected. 24. From what is stated above, it is seen that the only aspect in respect of which the Award of the Tribunal requires modification is in respect of the principle to, be adopted for calculating direct tax. As we have accepted the contention of the Company in that regard, it follows that recomputation of the available and allocable surplus will have to be made after making a calculation of direct tax without deducting bonus payable for the year 1965-66. 25. In the original calculation filed by the Company, it calculated tax only in the sum of Rs. 98, 10, 893. It has later on corrected this figure by adding a sum of Rs. 1, 34, 921 being surtax. Therefore, the total direct tax will be Rs. 99, 45, 814. Here again Mr. Gupta in his affidavit dated March 23, 1972 has given the correct figures. Therefore the recomputation of the available surplus, allocable surplus and the percentage of bonus for T he accounting year 1965-66 on the basis of our judgment will be as follows "TABLE" 26. From the above, it will be seen that the workmen will be entitled to bonus at 14.02% of their total salary or wages and the amount will be Rs. 14, 76, 706 and not Rs. 20% as awarded by the Tribunal. From this it follows that the further direction in the Award of the Tribunal regarding set on cannot be accepted. Admittedly, the Company has already declared and paid Rs. 14, 22, 922 representing 13.51% of the total wages or salary. Therefore, the balance additional amount that the Company will have to pay by way of bonus to make up the 14.02%, as stated above, is Rs. 53, 714. This amount will be paid by the Company within a period not exceeding two months from today.

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

Explanation:
1[ds]9. We are in entire agreement with this contention of Mr. Mukherjee. In view of the decisions of this Court, to which we will immediately refer, Mr. P. S. Khera, learned counsel for the Unions was unable to support the reasoning of the Tribunal on this aspect10. The question of calculation of direct tax under the Act was considered for the first time b y this Court in Metal Box Co. of India Ltd. v. Their Workmen.([1969] 1 S.C.R. 750.) It was held therein that the national tax liability is to be worked out by first working out the gross-profits and deducting there from the prior charges under s. 6, but not the bonus payable to the employees. Therefore, it is clear from this decision that an employer is entitled to deduct his tax liability without deducting first the amount of bonus he would be liable to pay from and out of the amount computed under ss. 4 and 6 of the Act. The same principle, has been reiterated in The Workmen of William Jacks and Company Ltd. Madras v. Management of William Jacks and Co., Madras, (A.I.R. 1971 S.C. 1821.) Delhi Cloth and General Mills Co. Ltd. v. Workmen([1971] 2 S.C.C. 695) and Indian Oxygen Ltd. etc. v. Their Workmen. (A.I.R. 1972 S.C. 471.) In fact the last decision overruled the decision of the National Industrial Tribunal in Reference No. NIT-1 of 1966, which has been followed by the present Tribunal. We may also state that after the first decision of this Court, referred to above, the Act was amended in 1969. The last three decisions of this Court considered the question whether the amendments effected to the Act had made any change in the principle laid down by this Court in the first decision. It was uniformly held in all the three decisions that the amendment has not effected any change in the principle laid down in the earliest decision that the tax liability under the Act is to be worked out first by working out the gross-profits and deducting there from bonus payable to the employees. Therefore, it follows that the Tribunal committed an error in law in corrupting, direct tax after deducting bonus. Therefore, this point will have to be held in favour of the appellant11. The second item relates to the disallowance of Rs. 2.65 lakhs which represented the ex-gratia payment made by the Company to certain employees drawing, emoluments exceeding Rs. 750 per mensem for the year 1964-65. The Company claimed that this amount should be deducted from the gross profits whereas the Unions contended that the same has to be added back to the gross-profits shown in the profit and loss account. The factual position relating to this claim is as follows: From the letter dated February 4, 1966, Ext. 1, written by the Company to one of its officers Mr. S. N. Banerjee, it is seen that the Company in appreciation of the officers services during the year 1964-65 made an ex-gratia payment of Rs. 90. Mr. Banerjee has given evidence on behalf of the Unions. He has deposed to the fact that he was drawing about Rs. 1, 000 per mensem and that he received the letter Ext. I as well as the sum of Rs. 90 mentioned therein. H e has further stated that over and above this sum of Rs. 90 he has also, received the bonus payable to him under the Act for the year 1964-65. He has also deposed to the effect that the ex-gratia payment of Rs.( 90 was paid to him in lieu of bonus calculated on the difference in emoluments drawn by him and the ceiling of Rs. 750 per mensem fixed by the Act. It was the practice of the Company to pay bonus to all the members of its staff without application of any ceiling. In view of the fact that a ceiling had been fixed under the Act, to make up for the lesser amount that the employees like Mr. Banerjee will get under the Act, this amount of Rs. 2.65 lakhs was paid to all such officers. The Tribunal accepted the evidence of Mr. Banerjee that the ex-gratia amount was paid to keep up the old practice of the Company of paying all the members of the staff without the application of any ceiling. The Tribunal held that such a payment was not an item which could be deducted from the gross-profits under the Act as claimed by the management. Accordingly, it added back the sum of Rs. 2.65 lakhs to the gross-profits shown i n the profit and loss account13. We are not inclined to agree with the contention of Mr. Mukherjee that the Tribunal committed an error when it added back the sum of Rs. 2.65 lakhs. From the evidence of Mr. Banerjee, which has been accepted by the Tribunal, read along with the letter Ext. 1, it is clear that Mr. Banerjee received not only bonus due to him under the Act, but also the extra amount of Rs. 90. Mr. Banerjee was admittedly drawing a salary of Rs. 1000 per mensem. For a person to be an "employee" under s. 2(13), among other things, he is a person drawing a salary or wage not exceeding Rs . 1600 per mensem. Under s. 8, it is provided that every employee is entitled to be paid in an accounting year bonus as per the Act provided he has worked in the establishment for not less than thirty working days in that year. Section 10, provides for payment of minimum bonus to every employee. Similarly s. 11 provides for payment of bonus to every employee subject to a maximum of 20% of his salary or wage. According to Mr. Mukherjee there is no prohibition in the Act from paying bonus to officers like Mr. Banerjee, up to a maximum of 20%. Therefore, when the payment as in Ext. 1, has been made to officers like Mr. Banerjee and others, such amounts have to be computed as an item of expenditure, under the Second Schedule of t he Act. It is no doubt true that an officer drawing a salary not exceeding, Rs. 1600 per mensem is an employee under s. 2(13) and he will also be eligible for payment of bonus under s. 8 read with ss. 10 and 11 of the Act. But , the point that is missed by the learned counsel is the limitation contained in s. 12. Though officers drawing salary up to Rs. 1600 per mensem are employees under s. 2 (13) and eligible for bonus, still for purposes of calculation of bonus payable under ss . 10 and 11, such officers, whose salary exceeds Rs. 750 per mensem, for calculating bonus, the, salary or wages per month will be taken at the maximum of Rs. 750 per mensem. That is, if an officer is getting, Rs. 1500, per mensem. he will be eligible for onus; nevertheless for calculating bonus payable to him he will be treated as drawing a salary of only Rs. 750 per mensem. Therefore, Mr. Banerjee, in the case before., us, has admittedly to be paid bonus, which is due to him under the Act f or the year 1964- 65 on the, basis that his salary is only Rs. 750 per mensem. What the Company has done was to pay him not only the bonus as calculated under the Act, but also an additional amount. Such additional amount paid to all such officers tot alling Rs. 2.65 lakhs cannot be considered to be an expenditure debited directly to Reserves. The Tribunal was justified in adding back this amount to the gross-profits16. The right of parties like the respondents before us even in labour adjudication to support the decision of the Tribunal on grounds which were not accepted by the Tribunal o r on other grounds which may not have been taken note of by the Tribunal, has been recognised by this Court in Management of Northern Railway Co-operative Society Ltd. v. Industrial Tribunal, Rajasthan etc.([1967] 2 S.C.R. 476.) In fact this decision had to deal with an appeal filed a Co-operative Society against the Award of the Tribunal setting aside the order passed by the Society removing from its service an employee. This Court permitted the Union concerned, which was respondent in the appeal, to support the Award of the Tribunal, directing reinstatement of the employee on grounds which had not been accepted by the Tribunal and also on ground which had not been taken notice of by the Tribunal. Similarly, in J. K. Synthetics Limited v. J. K. Synthetics Mazdoor Union ([1971] 2 L.L.J 552), this Court permitted the Union, which was the respondent in the appeal, to support the decision of the Industrial Tribunal on a method of computation regarding bonus which was not adopted by the Tribunal. Though t he management appellant therein challenged the right of the Union to support the award on other grounds without filing an appeal, that contention was rejected by this Court17. In the said decision this Court also found support for the above view in the decision of Ramanbhai Ashabhai Patel v. Dabhi Ajitkumar Fulsinji and others([1965]1 S.C.R. 712.), though the latter decision related to an election appeal18. We will now deal with the items, which, according to the Unions should not have been allowed to be deducted from the gross-profits. The first item r elates to a sum of Rs. 18, 24, 047 paid by the Company to retired workmen at Jamshedpur Workshop under a Voluntary Retirement Scheme. This Scheme is Ex. G. and it was framed on August 9, 1965. The Scheme states that the Company has been suffering, from an acute shortage of imported raw materials in view of the difficulty in getting foreign exchange and as such production could not be maintained for some, considerable time. In view of these difficulties it is stated that the Company has found it necessary substantially to reduce the number of workers in the Workshop. The Scheme offered substantial benefits to workmen who choose to retire voluntarily, namely, ex-gratia payment equal to retrenchment compensation under s. 25 of the Industrial Disputes Act, and gratuity admissible to the workmen. There is evidence on the side of the Company that about 450 workmen availed themselves of the Voluntary Retirement Scheme and a sum of Rs. 18, 24, 047 was paid . This item has been included in the profit and loss account under the heading "Salary, Wages, Bonus and Retirement gratuities." The Company gave a break- , up of these items in answer to the interrogatories furnished to it by the workmen.