Case: Shri Ambica Mills Ltd. No. 1 Vs. The Textile Labour Association, Ahmedabad,, And Vice Versa

because it is registered under the Companies Act. The payment of Bonus Act, Section 2 (9) defines a company as follows :"(9) company means any company as defined in Section 3 of the Companies Act, 1956, and includes a foreign company within the meaning of Sec. 591 of that Act;" A corporation is defined in Section 2 (11) as "any body corporate established by or under any Central, Provincial or State Act but does not include a company or a co-operative society". Now it will be noticed that the definition of the term corporation takes in bodies corporate established by law as well as bodies corporate established under any law. It cannot, therefore, be said that when item 6 (g) in the Second Schedule uses the words body corporate established by any law it was not conscious of the distinction between a body corporate established by law and a body corporate established under any law. This distinction has also been noticed in the decision of the High Court of Bombay in Majoor Sahkari Bank Ltd. v. M. N. Majumdar, (1955) 2 Lab LJ 755 = (AIR 1967 Bom 36). In discussing this question the learned Judges said :"But what, in our opinion, the notification contemplates is not incorporation under any law but by an Indian law, which means that special law should incorporate the particular company or association. For instance we have a Reserve Bank of India, we had an Imperial Bank of India, we have now State Banks. The Act itself incorporates the bank, association or society. And the language used is clear. It is not "incorporated under an Indian law"; it is "incorporated by an Indian law". But what appears to us to be fairly clear is the first part of the notification and when we look at that it applies to the business of banking companies registered under any of the enactments relating to companies for the time being in force. Now the object obviously was to apply this notification not to associations of less than 10 persons who were doing business of banking and who could not be incorporated but to confine the operation of this notification to ten persons or more who could be and would have to be registered, either under the Indian Companies Act or some other Act relating to companies." 25. It was argued by Mr. Mr. Gupta that under the Act bonus is payable by a "corporation" as well as a "company" and, therefore, the words body corporate established by any law should be deemed to include even a body corporate established under any law i.e. even a company. But it appears to us that the words body corporate established by any law have been deliberately used. While all companies and corporations, as defined in the Act are liable to pay bonus, the intention seems to be that only subsidies paid by body corporate established by any law, should be deductible items and not subsidies paid by bodies corporate established under any law. The above decision of the Bombay High Court referred to the Reserve Bank of India, Imperial Bank of India and State Banks. There are bodies corporate established by law like the Rubber Board, Coffee Board etc., which grant subsidies for replantation, rehabilitation etc. The idea apparently in referring to a body corporate established by any law was that when bodies corporate are established by any law for the specific purpose of encouraging any industry and they grant subsidies, such subsidies alone should be taken into account. We are of the opinion, therefore, that item 5 also is not a deductible item. 26. This leaves for decision the question whether the sum of Rupees 9,72,986 which relates to amounts received in the year 1967 but relates to earlier years, can also be deducted or not. In the view that we have taken that only item 1 is a deductible item, the amount involved is a small one of Rs. 6,873 due for the year 1966 but received in the year 1967.We are not able to agree with the contention on behalf of labour that as the whole of the sum of Rs. 32,43 lacs has been shown as item of income in the profit and loss account of the mills the management cannot now contend that any part of it cannot be deducted and that the whole of the amount should be held to be profit available for calculating the bonus. All that S. 23 of the Act provides is for presumption of the accuracies of the balance sheet and profit and loss account of corporations and companies. The correctness has been accepted by both the parties. But whether any part of that amount should be held to fall under item 6 (g) of the Second Schedule to the Act cannot be dediced on the basis that it is shown as an income in the profit and loss account or the balance sheet. There is no question of estoppel here. All the same we have no doubt that amounts due for earlier years received in 1967 should also be deemed to be income for the year 1967. Otherwise it means that such sums would not have been taken into account in the years for which they were due as also in the years when they were received. Moreover, the accounts in this case have been maintained on a cash basis and, therefore, the amounts received in the year 1967 should be deemed to be the income of that year though due in respect of an earlier year. We may also refer to the decision in Consolidated Coffee Estate Ltd. v. Workmen, (1970) 2 Lab LJ 576 (SC) where it was held that even though the company had been paying bonus in the past by negotiating with its employees, if it insisted that for the year in question it would pay in accordance with the relevant law it could not be prevented from having its liability for bonus determined accordingly.

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

Explanation:
0[ds]18. We may, perhaps, refer in this connection to certain decisions relied on by the both sides. In Sone Valley Portland Cement Co. v. The Workmen, (1972) 1 Lab LJ 642 = (AIR 1972 SC 2148  ) this Court held that apart from legislation an incentive bonus for increase of production, irrespective of the question as to whether the industry was making profit or not is one that must be introduced by the particular unit of industry, and it would be for the management to fix what incentives should be given to different departments to step up production. It was further held that an Industrial Tribuanal would not be justified in holding that merely because there has been augmentation in the production labour would be entitled to make a claim to bonus because of such increase, and that labour would undoubtedly be entitled to to revision of wage scales, dearness allowance and other terms and conditions of service as also profit bonus. This decision is not, therefore, an authority for the proposition that a subsidy intended to encourage export could not be taken into account for the purpose of calculating the allocable surplus. This decision itself proceeds on the basis that in calculating the profit bonus such amounts would have to be taken into account. All that was held was that the amount paid as subsidy by itself could not be considered to be one in which labour would be entitled to share19. The decision of this Court in Bengal Textiles Association v. I. T. Commr. AIR 1960 Sc 1320   though it had to consider the meaning of the word subsidy occurring in the Business Profits Tax Act 1947, would not be relevant for deciding the question at issue. In that case it was held that the use of the word bonus or subsidy connotes that the payment is in the nature of a gift, and as the payments in that case were made by the Government to an association to assist it in carrying on its business and for the services it was rendering to Government, the payments were not in the nature of a gift. This decision was relied on by Mr. Tarkunde as supporting his argument that a payment made for a service rendered cannot be deemed to be a subsidy. That is no doubt so, but in the present case there is no question of any service rendered by the management to the Government. The mere fact that the Government is interested in encouraging exports and, therefore, offers many incentives for export, of which any manufacturer could take advantage, does not mean that any such manufacturer is rendering any service to Government. These are schemes intended by the Government for the benefit of the country and, therefore, any person would be entitled to take advantage of that scheme and be entitled to subsidy or assistance promised by the Government. Such payments do not become either payments for service rendered or cease to be subsidy merely on the ground that any number of persons coming under that category would be entitled to that benefit of payment20. It was argued by Mr. Tarkunde that if a manufacturer takes it into his head to export all the products that he had manufactured it would mean that all his receipts would be in the form of subsidy, drawback on Central Excise and rebate on railway freight, and if all these items are to be deducted from the profits there will be nothing available for distribution as bonus and that it will be unfair to labour to deprive it of its share of the income from products towards the production of which it has made its own contribution. Notionally that is possible but in actual practice that is hardly likely.But it does not, however, take away the force of the argument that the deduction of subsidies from the total income would be unfair to labour in the matter of payment of bonus. As we have already pointed out the remedy lies with the Legislature. What prompted the Government to include item 6 (g) in the Second Schedule to the Bonus Act we have no way of knowing26. This leaves for decision the question whether the sum of Rupees 9,72,986 which relates to amounts received in the year 1967 but relates to earlier years, can also be deducted ornot.In the view that we have taken that only item 1 is a deductible item, the amount involved is a small one of Rs. 6,873 due for the year 1966 but received in the year 1967.We are not able to agree with the contention on behalf of labour that as the whole of the sum of Rs. 32,43 lacs has been shown as item of income in the profit and loss account of the mills the management cannot now contend that any part of it cannot be deducted and that the whole of the amount should be held to be profit available for calculating the bonus. All that S. 23 of the Act provides is for presumption of the accuracies of the balance sheet and profit and loss account of corporations and companies. The correctness has been accepted by both the parties. But whether any part of that amount should be held to fall under item 6 (g) of the Second Schedule to the Act cannot be dediced on the basis that it is shown as an income in the profit and loss account or the balance sheet. There is no question of estoppel here. All the same we have no doubt that amounts due for earlier years received in 1967 should also be deemed to be income for the year 1967. Otherwise it means that such sums would not have been taken into account in the years for which they were due as also in the years when they were received. Moreover, the accounts in this case have been maintained on a cash basis and, therefore, the amounts received in the year 1967 should be deemed to be the income of that year though due in respect of an earlier year. We may also refer to the decision in Consolidated Coffee Estate Ltd. v. Workmen, (1970) 2 Lab LJ 576 (SC) where it was held that even though the company had been paying bonus in the past by negotiating with its employees, if it insisted that for the year in question it would pay in accordance with the relevant law it could not be prevented from having its liability for bonus determined accordingly.