Case: Jabalpur Bijlighar Karamcharipanchayat Vs. Jabalpur Electric Supply Co., Ltd. &amp; Anr

by working on the Full Bench Formula of the Labour Appellate Tribunal. There can be no question that income-tax has to be notionally computed at 45% after deduction from the gross profits, the expenses shown in Ex. D-11 ending with notional normal depreciation and double shift depreciation. The Tribunal allowed Rupees 1,07,052 but the result of the addition to the gross profit of Rs. 8,88,598 (1) the difference in the value of the coal consumed, (2) the amount disallowed out of the furniture repairs and (3) the interest amount of Rupees 16,645/- the income-tax to be allowed in the working sheet would be Rupees 1,94,435/- in place of Rs. 1,07.052/-. 24. The last item disputed by the appellant was the return on working capital which was shown as Rupees 8,25,243/- in Ex. D-11. The evidence given on this head was that of Mr. B Chatterjee. He referred to various exhibits viz., D-22 to D-27 in this connection Ex. D-32 was a statement complied for showing reserves available as working capital. Exs. D-24 and D-25 went to show that at the relevant period, the company was borrowing moneys from the United Bank of India Ltd. The Tribunal accepted the companys case that Rs. 8,25,243/- should be taken to be the working capital of the company for the relevant year and return at 6 per cent, should be deducted to arrive at the available surplus for distribution. The evidence on this head was furnished by B. Chatterjee who said that the sum had been calculated as shown in Ex. D-11 in accordance with Clause XVII (e) of the Sixth Schedule to the Electricity Act, and this sum being the lesser of the two was incorporated in Ex. D-11. The details of the requirement of liquid funds to run the undertaking was given in Ex. D-16 In his cross examination Chatterjee said that besides the items shown in Ex. D-22 (statement of reserves) and other funds which had been used as working capital, the company had to take the loan in spite of these reserves which were already employed in the business as working capital. 25.Mr. Chagla contended that the working capital as computed in accordance with Schedule VII of the Electricity (Supply) Act being a statutory computation could be taken into account even for the working out of the Full Bench formula of the Labour Appellate Tribunal.In our view, this is not the correct position in law. In T. T. E. Supply Companys case, (1960) 3 SCR 68 = (AIR 1960 SC 782 ) (supra) the question considered by this Court was whether the Full Bench formula should be applied to an electric supply undertaking in preference to the provisions of the different clauses of paragraph xvii of the Sixth Schedule to the Electricity Supply Act and this Court concurred with the view expressed by the Labour Appellate Tribunal that even in such a case the Full Bench formula should be applied. In the Ahmedabad Miscellaneous Industrial Workers Unions case, (1962) 2 SCR 934 = (Air 1962 SC 1255 ) (supra) where one of the questions before this Court was whether depreciation should be calculated according to the provisions of the Income-tax Act and the rules framed thereunder or according to the provisions contained in the Seventh Schedule to the Electricity Supply Act, it was held that the rates prescribed under the rules framed under the Income-tax Act lay down the proper measure of depreciation to be allowed as in the view of this Court the field of industrial relations in connection with which the Full Bench formula was evolved, it was not proper to inject therein the provisions contained in the Seventh Schedule to the Electricity Supply Act. 26. There can be no dispute that a good portion of the reserve must have been utilised in running the company inasmuch as it was obliged to borrow moneys from the bank and pay interest thereon. It is highly unlikely that a company which had reserves as disclosed by its balance-sheet and profit and loss account would borrow moneys from a bank unless it was utilising the reserves for some other and more remunerative purpose. The balance-sheet and the profit and loss account negative such a view and loss account negative such a view and no evidence which throws light on the question was recorded. 27. We are however not called upon in this case to come to a finding as to how much of the reserves were utilised as working capital in view of the fact that even without taking this item into account, there is no available surplus left in terms of the working sheet which forms the basis for determining the available surplus. 28. The working sheet according to us should be altered as follows: To the figure Rs. 6,88,905 shown as surplus in Ex. D-11 after the deduction of various items of expenses should be added three figures i.e. (1) coal and fuel Rs. 1,57,428/- (2) furniture account Rs. 20,612 and (3) interest Rs. 16,545/- making a total of Rs. 8,83,490/-as gross profits. From this will have to be deducted Rs. 4,51,011 being the sum of notional normal depreciation of Rs. 3,55,755 and double shift depreciation Rupees 95,256/-. This leaves a balance of Rs. 4,32,439. From this will have to be deducted the income-tax of 45%which in view of the addition of the items regarding coal, furniture and interest should be Rs. 1,94,615 in place of Rs. 107,052 as shown in Ex. D-11 Deducting this from Rs. 4,32,479 the balance left is Rs. 2,37,864. From this has to be deducted the statutory contingencies reserve and the statutory development reserve and 6 per cent. on the share capital of Rs. 22,49,850/- there being no dispute as to these figures. The result in that from the figure of Rs. 2,37,364 there has to be deducted a sum of Rs. 2,38,585 which leaves a negative balance of Rs. 721.The case of the appellant for showing an available surplus for distribution therefore disappears.

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

Explanation:
0[ds]7. The above statement of facts makes it amply clear that although the employees received at least 10% of their total earnings by way of bonus for the years 1940-41 to 1959-60 there was no consistency in the claim to bonus throughout this period, nor was there any uniformity either in the amounts paid or the grounds under which the several awards of bonus came to be made. The only award which indicated that the bonus was to be regarded as a Diwali bonus was that of Justice Bhat for the period 1957-58 to 1959-60. For the period 1940-41 to 1956-57 the company never paid bonus as a festival bonus on the occasion of the Diwali. The amount was mostly paid under awards but in between the awards there was a period when it was paid by express agreement between the parties14. The above decision all go to negative the claim of the appellant before us. The only fact about which there can be no doubt is that payment was made at the rate of 10 per cent. for a large number of years with an intervening period when it was made at the rate of 11 per cent. The facts do not warrant any conclusion as to the payment being related either to any festival or under an implied term of employment between the parties. It will be noted that for the very first period i.e. the years from 1940-41 to 1945-46 there was no claim for the payment of either customary bonus or a festival bonus. On the other hand the express claim was made for War bonus. The major part of the entire period was covered by awards and excepting in one of these awards there was no reference to any festival bonus. There was an intervening period which, as already noted, was covered by an express agreement between by an express agreement between the parties. The rate too, as already shown, was not uniform. Consequently the claim made by the appellants that they should be paid 10 per cent. either as festival bonus or under an implied term of employment cannot be acceptedBut this in our opinion cannot be accepted as the available surplus has to be found out by working on the Full Bench Formula of the Labour Appellate Tribunal. There can be no question that income-tax has to be notionally computed at 45% after deduction from the gross profits, the expenses shown in Ex. D-11 ending with notional normal depreciation and double shift depreciation. The Tribunal allowed Rupees 1,07,052 but the result of the addition to the gross profit of Rs. 8,88,598 (1) the difference in the value of the coal consumed, (2) the amount disallowed out of the furniture repairs and (3) the interest amount of Rupees 16,645/- the income-tax to be allowed in the working sheet would be Rupees 1,94,435/- in place of Rs. 1,07.052/-24. The last item disputed by the appellant was the return on working capital which was shown as Rupees 8,25,243/- in Ex. D-11. The evidence given on this head was that of Mr. B ChatterjeeHe referred to various exhibits viz., D-22 to D-27 in this connection Ex. D-32 was a statement complied for showing reserves available as working capital. Exs. D-24 and D-25 went to show that at the relevant period, the company was borrowing moneys from the United Bank of India Ltd. The Tribunal accepted the companys case that Rs. 8,25,243/- should be taken to be the working capital of the company for the relevant year and return at 6 per cent, should be deducted to arrive at the available surplus for distribution. The evidence on this head was furnished by B. Chatterjee who said that the sum had been calculated as shown in Ex. D-11 in accordance with Clause XVII (e) of the Sixth Schedule to the Electricity Act, and this sum being the lesser of the two was incorporated in Ex. D-11. The details of the requirement of liquid funds to run the undertaking was given in Ex. D-16 In his cross examination Chatterjee said that besides the items shown in Ex. D-22 (statement of reserves) and other funds which had been used as working capital, the company had to take the loan in spite of these reserves which were already employed in the business as working capitalIn our view, this is not the correct position in law. In T. T. E. Supply Companys case, (1960) 3 SCR 68  = (AIR 1960 SC 782  ) (supra) the question considered by this Court was whether the Full Bench formula should be applied to an electric supply undertaking in preference to the provisions of the different clauses of paragraph xvii of the Sixth Schedule to the Electricity Supply Act and this Court concurred with the view expressed by the Labour Appellate Tribunal that even in such a case the Full Bench formula should be applied. In the Ahmedabad Miscellaneous Industrial Workers Unions case, (1962) 2 SCR 934   = (Air 1962 SC 1255  ) (supra) where one of the questions before this Court was whether depreciation should be calculated according to the provisions of the Income-tax Act and the rules framed thereunder or according to the provisions contained in the Seventh Schedule to the Electricity Supply Act, it was held that the rates prescribed under the rules framed under the Income-tax Act lay down the proper measure of depreciation to be allowed as in the view of this Court the field of industrial relations in connection with which the Full Bench formula was evolved, it was not proper to inject therein the provisions contained in the Seventh Schedule to the Electricity Supply Act26. There can be no dispute that a good portion of the reserve must have been utilised in running the company inasmuch as it was obliged to borrow moneys from the bank and pay interest thereon. It is highly unlikely that a company which had reserves as disclosed by its balance-sheet and profit and loss account would borrow moneys from a bank unless it was utilising the reserves for some other and more remunerative purpose. The balance-sheet and the profit and loss account negative such a view and loss account negative such a view and no evidence which throws light on the question was recorded27. We are however not called upon in this case to come to a finding as to how much of the reserves were utilised as working capital in view of the fact that even without taking this item into account, there is no available surplus left in terms of the working sheet which forms the basis for determining the available surplus28. The working sheet according to us should be altered as follows: To the figure Rs. 6,88,905 shown as surplus in Ex. D-11 after the deduction of various items of expenses should be added three figures i.e. (1) coal and fuel Rs. 1,57,428/- (2) furniture account Rs. 20,612 and (3) interest Rs. 16,545/- making a total of Rs. 8,83,490/-as gross profits. From this will have to be deducted Rs. 4,51,011 being the sum of notional normal depreciation of Rs. 3,55,755 and double shift depreciation Rupees 95,256/-. This leaves a balance of Rs. 4,32,439. From this will have to be deducted the income-tax of 45%which in view of the addition of the items regarding coal, furniture and interest should be Rs. 1,94,615 in place of Rs. 107,052 as shown in Ex. D-11 Deducting this from Rs. 4,32,479 the balance left is Rs. 2,37,864. From this has to be deducted the statutory contingencies reserve and the statutory development reserve and 6 per cent. on the share capital of Rs. 22,49,850/- there being no dispute as to these figures. The result in that from the figure of Rs. 2,37,364 there has to be deducted a sum of Rs. 2,38,585 which leaves a negative balance of Rs. 721.The case of the appellant for showing an available surplus for distribution therefore disappears.