Case: Workmen Of M/S. Hindustan Motors Ltd Vs. M/S. Hindustan Motors,Ltd.,&amp; Anr

of Rs. 14.48 lacs of investment came out of the paid-up capital. Consequently, no question can arise of reducing this amount from the paid-up capital when allowing 6 per cent return on it in accordance with the Full Bench Formula.41. Another deduction, while calculating the surplus out of the profits available for distribution of bonus, which has been challenged on behalf of the workmen relates to the income from home delivery commission. From the facts it appears that this Company was manufacturing cars in collaboration with a foreign concern and the arrangement was that, if that foreign concern sold any of its goods in India, the Company would be entitled to its commission on those even though the Company may not be a party to the transactions of those sales. This arrangement thus recognised the exclusive right of the Company in respect of sale of its cars and to reimbursement in case the foreign collaborator entered into transactions infringing that right. It seems to us that the income thus accruing to the Company has to be treated as extraneous income which was earned by the Company without any activities in which the workmen participated or contributed their labour. Learned counsel for the workmen referred us to the decisions of this Court in Tata Oil Mills Co. Ltd., (1960) 1 SCR 1 = (AIR 1959 SC 1065 ) (supra) and Voltas Limited v. Its Workmen, (1961) 3 SCR 167 = (AIR 1881 SC 941). The situations that were discussed in those cases were different. In those cases, the principle laid down was that, if any income was earned in the course of the normal business of the Company in which the workmen were also engaged that income must be included in the profits for calculation of surplus available for distribution of bonus. None of the instances that came up for consideration were similar to the one before us.The home delivery commission earned in the present case did not require any contribution of work or labour on the part of the workmen, and accrued to the Company simply because of its agreement with the foreign collaborator which entitled the Company to claim the commission without going through any process of manufacturing or selling the cars or their components. In the circumstances, the deduction of the home delivery commission from the profits was fully justified.42. The last point urged related to the interest on fixed deposits earned by the Company during the bonus year. We have already indicated earlier that a sum of Rs. 220 lacs was in fixed deposit account and the profit and loss account shows that a sum of Rs. 5.17 lacs was received as interest on it by the Company. This has also to be excluded when calculating the available surplus, because this income also accrued to the Company without any contribution on the part of the workmen. It was not the regular business of the Company to keep money in fixed deposits and earn interest thereon. At the same time, how ever, we feel that on equitable grounds, the Company should not be entitled to claim the sum of Rs. 2.16 lacs as an expenditure of the business of the Company in respect of interest paid to bank and others. When the Company was receiving interest on fixed deposits, it would he proper to hold that at least the interest paid by the Company should come out of the interest earned by it. There seems to be no justification for permitting a Company to keep money in fixed deposit and treat the interest accruing on it as extraneous income, while at the same time, permitting the Company to take loans pay interest and treat that interest as business expenditure. Consequently, in the case, when calculating the available surplus, a sum of Rs. 5.17 lacs minus Rs. 2.16 lacs Rs. 3.01 lacs only will be deducted as extraneous income which was earned without any contribution from the workmen and which cannot, therefore, be taken into account when calculating available surplus.43. On the basis of these decisions, we have worked out Charts showing the amount of annual rehabilitation provision which must be allowed to the Company and, taking that into account, the amount of surplus available out of the profits for distribution as bonus. Chart I shows the annual rehabilitation requirement for machinery which works out at Rs. 116.07 lacs. Chart II gives the calculation, on the basis of this figure of the net amount required for rehabilitation during the year of bonus for the machinery and buildings, after taking into account the depreciation provision for the year of bonus. This net amount is Rs 64.97 lacs. Chart III, based on these figures and on other figures arrived at by us in our judgment, shows that a net amount of Rs. 30.56 lacs would be available as surplus for payment of bonus during this year. The Tribunal was, therefore, not right in arriving at its decision that this Company was not in a position to pay bonus at all.44. As we have indicated earlier, the workmen have claimed bonus equivalent to 6 months wages which would amount to a sum of Rs. 24 lacs. We do not find any justification for granting bonus at such a high rate. Though the Company has earned a large amount of profit during the year of bonus, it is to be noticed that, for quite a large number of years, the Company has been running at a loss. The Company has an expanding business and the total amount of surplus available for allocation between the capital and the labour is Rs. 30.56 lacs. In all these circumstances, we consider it just and proper that bonus should be paid to the workmen at 20 per cent of their annual wages so that a total sum of Rs. 9.60 lacs out of this surplus will be paid out as bonus, leaving the balance of Rs. 21.03 lacs with the Company for being utilised for other purposes.

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

Explanation:
1[ds]3. In this appeal also, there is no dispute that the principles to be applied for working out the surplus available for distribution of bonus must be those approved by this Court in the case of Associated Cement Companies Ltd., 1959 SCR 925   = (AIR 1959 SC 961)these items, the most controversial is the first item of rehabilitation and that is also the most material one, because, if the figure of annual rehabilitation arrived at by the Tribunal is accepted, it is clear that no surplus can possibly remain out of the profits earned during the year for distribution of bonus. In the calculation of rehabilitation, various factors are involved which have been indicated by this Court in the case of Associated Cement Companies, 1959 SCR 925   = (AIR 1959 SC 967  )seems that the Tribunal, in making this direction, was also influenced by the circumstance that under theLaw the depreciation allowed in respect of precision andmachinery is different from which the Tribunal inferred that precision machinery will have a shorter life thanmachinery. In fact, the Tribunal was of the view that the proportion between the life of precision andmachinery can be safely taken to be the same as the proportion between the depreciation allowed in respect of the two. Proceeding on this basis, the Tribunal, in the statements prepared for and annexed as part of the Award, classified the machinery into precision andmachinery and worked out different life for the two kinds of machinery. In the course of arguments before us, it was urged on behalf of the workmen that the Company not having claimed that machinery classified as precision had a shorter life than machinery classified aseither in the written statements or at the stage of filing the first Schedule IA or even the second or third Schedule 1 A, there was no justification for the Tribunal to accept this classification and worked out different periods of life for different classes ofboth parties before us challenge the adoption of this classification by the Tribunal we consider that it will be right to ignore this classification and to proceed on the basis that the total file of the machinery must be worked out on an average for all the machines installed in the factory of the Company without making any distinction between precision machinery andn our opinion, this argument proceeds on an entirely incorrect basis.The life of a machinery of one particular factory need not necessarily be the same as that of another factory. Various factors come in that affect the useful life of a machinery. There is first the consideration of the quality of machinery installed. If the machinery is purchased from a country producing higher quality of machines, it will naturally have longer life than the machinery purchased from another country where the quality of production is lower. Again, the articles on which the machinery operates may very markedly vary the life of a machine. If, for example, a machine is utilised for grinding of cement, the strain on the machine will necessarily not be the same as on a machine which operates on steel or iron.We are, therefore, unable to accept the suggestion that the life of the machinery in the present case should have been fixed on the basis of the life accepted in other cases in which decisions were given on bonus disputes either by the Labour Appellate Tribunal or by this Court.6. The Tribunal, in its decision, worked out the life of the machinery on the basis of the percentage of depreciation allowed under theAct. The application of this principle has been attacked before us by both the parties. It is urged that the artificial rule laid down in theAct for calculation of notional depreciation can provide no criterion at all for determining the life of the machinery. We think that the parties are correct and that the Tribunal committed an error in proceeding on this basis.7. Through, in the case of Secy., South India Millowners Association, 1962 Supp (2) SCR 926 = (AIR 1962 SC 1221  ) (supra), this Court, on the facts of that case, accepted the life of the textile machinery as 25 years, the Court also laid down the principle for finding out the life of machinery in the followingare not prepared to accept either argument because, in our opinion, the life of the machinery in every case has to be determined in the light of evidence adduced by the parties ." (p 938 of SCR) = (at p 1224 of AIR).Obviously, this is the correct principle, because it is only when the life of machinery is determined in the light of evidence adduced by the parties in a particular case that the authority determining the life can take into account all the factors applicable to the particular machinery in question. As we have indicated earlier, when determining the life of a machinery, factors, such as the quality of the material used in the machines and the nature of the material on which the machines are to operate, very materially affect their life. Further, the life of a machine will also depend on the manner in which it is handled in a particular factory.We consequently, in this case proceed to examine the evidence given by the parties in this behalf.8. In order to prove the life of machinery, one method usually adopted by the Companies is to tender evidence of experts. In the present case, the Company tendered in evidence the statement of an expert, Gerald Waplington, which was recorded earlier on 5th November, 1961 by the Fifth Industrial Tribunal in a dispute pending before it. That dispute was also between this very Company and its workmen. In giving the life of machinery, Waplington first classified the machines into twopurpose machine tools and special or single purpose machineexpressed the opinion that a general purpose machine tool used for one single operation is likely to have a shorter economic life than special or single purpose, machine tool. According to him, a general purpose machine carrying on work of high accuracy will have an economic life of the order of 2 to 3 years only, while a special purpose machine doing similar work of high accuracy working 400 hours a month will have an economic life of 5 to 6 years. If the work taken from the machines is of less accuracy, then, in his opinion, a general purpose machine may have an economic life up to 5 years and a special purpose machine an economic life of 7 to 10 years. In his evidence, further, he made a distinction between economic life and useful life. He twice stated that economic life of a machine would be only 1/3 of the useful life of the machine so that if, on the basis of his evidence, the useful life of various classes of machines mentioned by him is to be worked out, the number of years given for each class by him above will have to be multiplied by 3 Thus, according to his evidence, the economic life of a machine will vary from 2 to 3 years as a minimum to 7 to 10 years at the maximum, and working out the useful life on the basis of his statement that economic life is only 1/3rd is of the useful life, the machines would have a minimum of 6 to 9 years and a maximum of 21 to 30 years useful life. We shall consider what inferences can be drawn from his statement at a later stage when we have discussed the other evidence available in this case. It may, however, be noted that Waplington is the only expert who can be held to be entirely disinterested, because the other two experts examined are employed as Engineers by the Company itself. This independent witness, Waplington, was not askedhad seen the various machines in the factory of the Company, nor was he at any time requested to indicate how many different machines in the factory of the company would fall. In the various classifications mentioned by him for which he has given different periods in respect of economic life.9. The other two witnesses examined are Joseph Joyce, General Master Mechanic, and Girish Chandra Bansal, Master Mechanic, employed by the Company. Both of them have, in their statements, given out their qualifications and experience which they have in dealing with automobile manufacturing machinery. According to Joyce, the economic life of the machinery of the Company cannot go beyond 6 years, and this statement was made on the basis of the machines working 16 hours a day in two shifts of 8 hours each. Later on, he added that, applying American standard, the life of the machines can only be 6 to 10 years. In giving the life, he qualified that word with economic" or "economic useful", so that he equated economic life with economic useful life gave the figures on this basis. Inhe, however, admitted that useful life of a machine is longer than its economic life. Thus, if various statements of his are taken into account, and it is kept in view that he is an employee of the Company, it may be accepted that, according to him the maximum economic life of the machinery of the Company will be between 6 to 10 years and the useful life will be longer: how much longer, he has not indicated. If we were to assume that he is using the expressions "economic life" and "useful life" in the same sense in which they were used by Waplington, economic life would be 1/3rd of the useful life, with the result that, on his evidence, useful life of the machinery of the Company would work out to be anywhere between 18 to 30 years. The third witness, Girish Chandra Bansal, estimated the efficient economic life, based on 16 hours per day working, at 6 to 10 years which coincides with the estimate by Joyce. In his case, however, no questions were put to elicit from him whether he would make any distinction between efficient economic life and useful life, so that his evidence does not appear to carry us any farther than the evidence of Joyce.10. It may be added that both these witnesses in their evidence stated that the workmen employed by the Company were not very skilled workers and this was a factor that had to be taken into account in considering the life of the machines in this Company. It is obvious that, if a machine is handled by a more skilful worker, it will last longer and have a longer life. A statement was also made by Joyce that machines running at high speed will have shorter life than those running at lower speeds; but this general statement made by him offers no assistance to us in this case, because he has not indicated in his evidence how many and which of the machines of the Company run at high speed and which at lowerhas already been mentioned earlier that in the second report of the Tarrif Commission in 1956 it was clearly stated that this Company was selling cars at a loss of Rs. 833 per car. It is in this background that the evidence given by the Company could be judged to find out what is the life of the machinery possessed by the Company. He also drew our attention to the principles laid down in this connection by the Full Bench of the Labour Appellate Tribunal in the Millowners Associations case,Lab LJ 1247 (supra), and by this Court in the Associated Cement Companies case 1959 SCR 925   = (AIR 1959 SC 967  ) (supra). In the former case, when laying down the principle that provision should be made for rehabilitation, replacement and modernization of the machinery the Tribunal held that :"It is essential that the plant and machinery should be kept continuously in good working order for the purpose of ensuring good return and such maintenance of plant and machinery would also be to the advantage of labour for the better the machinery, the larger the earnings, and the better the chance of securing a good bonus."In the latter case, this Court, when examining the scope of claim for rehabilitation held that :"this claim covers not only cases of replacement pure and simple but of rehabilitation and modernisation. In the context, rehabilitation is distinguished from ordinary repairs which go into the working expenses of the industry. It is also distinguished from replacement. It is quite conceivable that certain parts of machines which constitute a block may need rehabilitation though the block itself can carry on for a number of years: and this process of rehabilitation is in a sense a continual process. Unlike replacement, its date cannot always be fixed or anticipated. So with modernisation; and all these three items are included in the claim for rehabilitation. That is why we think it is necessary that the Tribunals should exercise their discretion in admitting all relevant evidence which would enable them to determine this vexed question satisfactorily." Proceeding further to distinguish between cases of replacement, modernisation and expansion the Court held :"It appears fairly on the evidence that the introduction of the modern plant or machine is in substance an item of expansion of the industry expenses incurred in that behalf have to be excluded. On the other hand, if the employer had to introduce the new plant essentially because the use of the oldcapable of giving service was uneconomic and otherwise wholly inexpedient, it may be a case of modernisation. Similarly, if by the introduction of a modern plant or machine the production capacity of the industry has appreciably increased, it would be relevant for the Tribunal to consider in an appropriate case whether it would be possible to apportion expenses on the basis that it is a case of partial modernization and partial expansion."It will thus be seen that when considering the question of rehabilitation, what is essentially to be taken into account is that the old plant, though capable of giving service, was uneconomic and otherwise wholly inexpedient when provision for its replacement and rehabilitation, even though it will include modernization, would be fully justified.12. In this context. it may be worthwhile examining at this stage the difference between economic life and useful life on which emphasis has been laid by Mr. Sen on behalf of the workmen. We have already indicated earlier that even the expert examined on behalf of the Company. Gerald Waplington, made a distinction between economic life of machinery and its useful life. Further, in giving the life, he applied American standards which may not be applicable in India. This Court, in various cases where the question of rehabilitation has been discussed, has laid emphasis on useful life rather than on economic life and, even in. the Associated Cement Companies case, 1959 SCR 925   = (AIR 1959 SC 967  ) (supra) in the extract quoted above, the Court held that modernisation is justified when the use of the old plant becomes uneconomic and otherwise wholly inexpedient. Thus, two tests were laid down, first, that it should be uneconomic and, second, that it should be also otherwise wholly inexpedient.The economic life as envisaged by Waplington, was not, therefore considered the appropriate test for determining when rehabilitation of the plant and machinery would be justified. In fact, one of the very major considerations that should he taken into account is the actual practice of the manufacturers using the machinery and, if evidence be available to find out how long the manufacturers continue to use the machinery as a rule.It may be that during the last few years of use, the machinery may be continued to be utilised because of want of resources and compulsion to retain the machinery because replacement is not possible at all. It is in the light of this situation that we proceed to examine the evidence given by the Company about the behaviour of its machinery and the steps taken by the Company to have the old machineryis to be noticed that, though 40 different machines were discarded by 26th October, 1962 when this statement was prepared, none of the machinery discarded was that installed up to the yearIn fact this situation is also borne out by the three Scheduleswhich have been referred to earlier by us. In those Schedulesthe machinery discarded and written off from books is shown as being worth Rs. 35,000 out of machinery of the value of Rs. 89.75 lacs installed in the yearThus, the machinery of that year discarded was nominal in value. None of the machinery installed between the years52 was discarded. Again a machinery installed inwas discarded to the extent of the nominal value of Rs. 39,000 out of Rs. 11.06 lacs, and no machinery installed inwas discarded. The machinery discarded was primarily that installer in the Years58 and its value was in the region of Rs. 46 lacs. Thus, right up to 1962, the old machinery purchased up to the year 1934 was almost all continued in use and was not discarded, even though machinery installed in the next four years was considered unfit for further use and was discarded or writtenlist contains more than 200 machines, but again, the machines installed during the yearor earlier included in it are only 5 in number, whereas the majority of machines included in that list are those installed in later years. Significance attaches to this factor because the machines installed in the yearwere of very large value, their cost being in excess of Rs. 89 lakhs. In fact that is the year in which the investment on installation of machinery was highest, barring the year of bonus and the year immediately preceding it. This statement thus shows that even though the Company wanted replacement of a number of machines which had been installed even in the yearand some machines installed in later years, the replacement of those machines was given preference over the replacement of machines installed earlier in the yearIn this statement, in the remarks column, it was mentioned that these machines are to be scrapped, but there was no statement that machines which had been installed in the year 194748 were also in such a condition that they required scrapping. Thus, these statements provide some indication of the life of machinery which point both ways. The fact that old machinery ofthough of large value, was not considered to be in such a condition as to require immediate replacement in preference to machinery installed later would point towards that machinery leaving a fairly long life. On the other hand, there is the factor that machinery installed in later years was actually scrapped or was sought to be scrapped, and this necessarily means that that later machinery was considered as having shorterstatement has the significance that though in the past two years the Company took the step of purchasing machines which would perform the identical functions which the old machines were performing the Company chose to add these machines as new ones as a part of its scheme of expansion rather than replace those old machines. In the yeartherefore the Company was still of the opinion that it was preferable to add a new machine of the same type rather than replace an old machine doing, the same work, and an inference would necessarily follow that that old machine must have been considered to be sufficiently serviceable. This is the view that the Company appears to have held in respect of machinery which was installed 14 or 15 yearsis true that, if there are very frequentin machinery, this would give an indication of the condition of the machinery and lead to the inference that their useful life is coming to an end. There is, however, one great difficulty in drawing any conclusion from the statistics of number ofof the machinery put forward on behalf of the Company. The Company has, no doubt, shown us statements that a number of machines hadduring the last few years preceding the year of bonus but no material was brought to our notice from which it might have been possible to compare how the same machinery was behaving in earlier years or within the first few years after it was installed. Unless it be possible to compare the number of breakdowns when their life is claimed to be over with the number ofbreakdowns when themachine was almost new or was running its economic or useful life, no assistance is available for assessing the life of the machinery from a mere table showing the number ofFurther, it was not possible from these statements to find out which of the machines installed in which year were subject to thenor did these statements give us any picture about the percentage of machines installed in different years which were included in these statements. Consequently, we have felt handicapped in drawing any inference from theseis true that the statement given of increase of rated time gives some indication that the condition of the machinery in this factory has been going down and though this factor is relevant in determining the useful life of machinery it cannot carry us very far, because there is no evidence which would enable us to lay down a correlation between the increase in the rated time and the expiry of the useful life of the machinery. It is not possible on the evidence to discover how much the rated time is expected to increase before it can be said that the machinery has completely run out its usefulis, no doubt, another aspect that must be taken into account, though we are unable to accept the submission that a machinery should be deemed to have useful life until it reaches the stage of having abreakdown value of 5 perNo such absolute rule can be inferred.20. In this case, the Tribunal, in fixing the life of the machinery, as we have mentioned earlier, proceeded to calculate it on the basis of the depreciation rate permitted under theAct. That basis was not acceptable to either of the parties before us.In these circumstances, we have to consider the cumulative effect of the various pieces of evidence and circumstances which we have discussed above and. on its basis to estimate what should be considered to be the useful life of the machinery of this Company. Reference may briefly be made to the various conclusions arrived at. The evidence of the independent expert and of the engineer employees of the Company gives a figure for useful life of machinery which may be anywhere between 6 years to 30 years. The lower figures given by them cannot be accepted as they relate to economic life in the strict sense of that expression and are based on American standards. At the same time, the maximum life worked out from their evidence is on the hypothesis that the useful life stated by Waplington to be three times that of economic life is also the useful life in the same proportion to economic life as given in the evidence of Joyce. Then, there is the evidence that this Company itself has been running its old machinery for quite a large number of years and even after 13 or 14 years of use, the Company in quite a large number of cases preferred, when buying similar machines, to utilise them for expansion rather than for rehabilitation. On the face of it, replacement of old machinery would have been preferred to expansion if the old machinery had really completed its useful life. In some cases, however, machinery purchased in later years had to be rehabilitated after much shorter periods but no detailed information is available why such early replacement became necessary. No material was provided to show the comparative quality of machines which have been run for a long time and machines which were replaced or sought to be replaced after shorter periods of use. After taking into consideration the various factors mentioned by us above, and on the evidence before us, we think that, in this case, it would be appropriate to hold that the average life of the machinery of this Company in respect of different kinds of machines obtained from different sources may be appropriately taken as 15 years. This life of 15 years arrived at by us, it may be mentioned is on the basis that the machines of the Company have been running during most of the period, to which the evidence relates in two shifts only. Girish Chandra Bansal one of the Engineers of the Company, examined as a witness, stated that the machines in this Company were working in two shifts only, until for the first time inthe factory started to runi.e., in three shifts. He added that the factory had been working in two shifts from the time it was founded. It is also clear that, if the factory had been working in only one shift, the life of the machinery would have been longer, and we think that in that case it would have been appropriate to take the life of the machinery as 25 years. On the other hand, after the machines are being worked in three shifts, the life of the machinery is bound to be lower and, consequently if the machines be worked in three shifts, it would be appropriate to take the life of the machinery at 10 years. In the present case, however, we are accepting the average life as 15 years for all the machines requiring rehabilitation, because the evidence, as mentioned above shows that the machines have been working in two shifts only from the time when the factory started functioning, with the exception that, in the first few years they were worked in only one shift, while, from the year preceding the year of bonus, they have been worked in three shifts. Consequently, it may be taken that, up to the year of bonus, the machines have been worked on the average, in two shifts. In working out the divisor, however, it will. have to be kept in view that the future life of the machinery will have to be calculated on the basis of three shifts and, consequently, on the basis of the figure of 10 years as the useful life of the machinery. We may also incidentally mention that this Court, in the case of National Engineering Industries Ltd. v. The Workmen, Civil Appeals Nos. 356 , 357 of 1966, D/= (AIR 1968 SC 538  ) accepted the life of the precision machinery of the Company concerned in that case as 15 years, so that the conclusion arrived at by us on the evidence in the present case happens to coincide with the figure of life accepted in thatthink that Mr. De is right in urging that, if any machinery is installed in bonus year, the Company would be justified in claiming that it must immediately start making provision for its rehabilitation, though the period for rehabilitation of that machinery would only start at the end of the bonus year.Once machinery has been installed and is in existence in the bonus year, the Company is entitled to say that it will require rehabilitation in future and that provision should be made for rehabilitation of that machinery also and the Company should start keeping reserves for that purpose from the year of bonus itself.Thus, in the present case, the machinery installed in the yearshould have been included in the rehabilitation statement, though the divisor in respect of that machinery will, on our decision given above, be 15 on the basis of two shifts and 10 on the basis of three shifts as the machines will still have a residuary life of 15 or 10 years, computing the period from the bonus year which is also the year of installation.23. The second factor entering the calculation, of rehabilitation requirement about which there was controversy between the parties is the multiplier. We have already mentioned the fact that, in the first and the third Schedulesthe Company gave one set of multipliers, while in the second Schedulehigher multipliers were given. The Tribunal took both sets of multipliers into account and worked out the average and accepted that as the correct multiplier, representing the rise in the price rate of the machinery requiring rehabilitation. Thereafter, the Tribunal held that the machinery which was to replace the old one would have a larger production and proceeded to work out figures for reducing the multipliers on that account. The Tribunal held that it would he justified to reduce the average multipliers arrived at by .75 for machinery installed up toby 55 for machinery installed during the years6, and by .35 for that installed during the years1. Before us, this method adopted by the Tribunal was criticised by counsel for both parties. On behalf of the workmen, it was contended that there was no justification for the Tribunal to take the average of the multipliers in the first and the second Schedulesand that the Tribunal should only have proceeded on the basis that the multipliers given in the first Schedulewere proved and were correct ones. On behalf of the Company, it vas urged that the Tribunal should have accepted the multipliers given in the second Scheduleand should not have reduced them by taking into account those given in the first Scheduleand, further, that there was no justification at all for the Tribunal to reduce the figures of the multipliers for the various blocks of machinery by .75, .55 or .35 on the ground that the machinery to be installed in replacement would have a higher production.24. We were taken by learned counsel for parties into the evidence tendered on behalf of the Company to prove the multipliers. We have found that the correctness of the multipliers shown in the first Schedulehas been very satisfactorily proved. It appears that those figures were arrived at by comparing the prices of the old machinery installed in various years with similar machinery purchased in subsequent years. That comparison was contained in statement Ext. 29. The Company s witness Bansal not only proved this statement, but also clearly stated that the machines originally purchased and those purchased later shown in that statement Ext. 29 were the same machines. Inhe further specifically asserted that the production capacity of these new machines mentioned in Ext. 29 was very much the same as that of the original machines which were to be replaced when they were new. It is also significant that these figures of multipliers included in the first Schedulewere not challenged on behalf of the workmen before the Tribunal. So far as the figures contained in the second Scheduleare concerned, it was suggested on behalf of the Company that they were based on subsequent quotations received for replacement machinery which formed part of a series Ext. 31. Learned counsel for the Company was, however, unable to point out any statement in the evidence of any witness which would show that the figures for multipliers incorporated in the secondwere actually calculated from the quotations contained in Ext. 31. In fact, no such evidence was possible, because the second Schedule1A was filedon behalf of the Company after the evidence of parties was over and that seconds Schedulenot being a part of the record before the Tribunal when evidence was recorded, it was not possible for any witness to give evidence proving those figures for multipliers. In these circumstances, we must hold that the Tribunal committed an error in taking into account the multipliers given in the second ScheduleAt the same time, we must also accept the contention on behalf of the Company that the Tribunal had no justification for reducing the multipliers by deducting 75, 55 and 35 in respect of the three blocks of machinery sought to be replaced. As we have indicated earlier, the Tribunal proceeded to hold that this deduction was justified on the ground that the new machines which had been purchased and which were being compared with the original machines sought to be replaced must necessarily have more productive capacity. We have not been able to find any evidence on the record of any witness which would support this conclusion. It is true that the statements made by Companys witnesses, particularly Bansal, show that the new machines were more efficient and were likely to produce better quality goods. At no stage, however, in theof Bansal was any statement made admitting that these new machines, whose prices were being compared with those of the old machines for rehabilitation, had a larger productive capacity than those original machines. In fact, as we have pointed out earlier, in hisBansal made a definite statement that these new machines will produce exactly the same number of pieces as the original machines when they were new. This Court in the case of the Associated Cement Companies Ltd., 1959 SCR 925   = (AIR 1959 SC 967  ) (supra) had indicated that it is only if, by the introduction of a modern plant or machine, the production capacity of the industry has appreciably increased that it would be relevant for the Tribunal to consider in an appropriate case whether it would be possible to apportion expenses on the basis that it is a case of partial modernisation and partial expansion. If, however, the increased production is not of a significant order, it may be regarded as incidental to replacement or modernisation and the question of apportionment may not arise (at p. 969 of SCR) = (at p 990 of AIR). It is, of course, possible that Bansal, in stating that the new machines the prices of which formed the basis of calculation of multipliers, have exactly the same capacity as the original machines to be replaced, may not he quite correct but there was no material at all from which the Tribunal could have justifiably inferred that the increase in production would he so material as to attract the principle for apportionment laid down by this Court in the case cited above and, consequently the Tribunal fell in to an error in reducing the multipliers merely on the assumption that the new machine must necessarily have a larger production capacity than the original machines. In these circumstances, we hold that the rehabilitation provision should have been calculated by the Tribunal on the basis of the multipliers given by the Company in the first Schedulewithout taking an average of those multipliers and the multipliers given in the second Scheduleand without decreasing the multipliers by 75, 55 and 35 in respect of various blocks.26. The third contested question with regard to rehabilitation relates to the deductions which have to be made out of the total rehabilitation requirement to arrive at the annual provision for that purpose which must be allowed in working out the available surplus for distribution of bonus. In the Associated Cement Companies Ltd. case, 1959 SCR 925   = (AIR 1959 SC 967  ) (supra), when approving the Full Bench Formula this Court indicated how the calculations should be made. It was heldactually awarding an appropriate amount in respect of rehabilitation for the bonus year certain deductions have to be made. The first deduction is made on account of thebreakdown value ofthe plant and machinery which is usually calculated al the rate of 5 per cent of the cost price of the block in question. Then the depreciation and general liquid reserves available to the employer are deducted. The reserves which have already been reasonably earmarked for specific purposes of the industry are, however, not taken into account in this connection. Last of all the rehabilitation amount which may have been allowed to the employer in previous years would also have to be deducted if it appear, that the amount was available at the time when it was awarded in the past and that it had not been used for rehabilitation purposes in the meanwhile. These are the broad features of the steps which have to be taken in deciding the employers claim for rehabilitation under the working of the formula." (at p. 970 of SCR) = (at p. 991 of AIR).The dispute in the present case relates to the deduction of the depreciation and general liquid reserves. One aspect in controversy in this behalf raised on behalf of the Company is that even depreciation should not be deducted unless it is available to the employer for purposes of rehabilitation. The argument was that in the sentence Then the depreciation and general liquid reserves available to the employer are deducted" the word "depreciation" should he read with the words "reserves available to the employer" and, consequently, the deduction should only be made of depreciation reserves available to the employer. We are unable to accept this submission, because the very principle on which rehabilitation provision is allowed when making calculations for awarding bonus militates against this interpretation. This Court, in the same case. in explaining why rehabilitation is granted, held:"We have already noticed that the object of providing depreciation of wasting assets in commercial accounting is to recoup the original capital invested in the purchase of such assets: but the amount of depreciation which is allowed under the formula tan hardly cover the probable cost of replacement. That is why the formula has recognised the industrys claim for rehabilitation in addition to the admissible depreciation." (at p. 966 of SCR) = (at p. 989 of AIR).It will thus be seen that the purpose of providing for rehabilitation charges is to enable the industry to cover the difference between the amount of depreciation which is recouped by making provision for it in accordance with the principles of commercial accounting and the amount that would he required to purchase the new machinery for replacement. Once the price of the new machinery is known, the rehabilitation amount would be the difference between that price and the amount provided as depreciation of wasting assets in accordance with the principles of commercial accounting. The deduction of depreciation provision made in the accounts is not, therefore, on the basis that that amount must be available for purchasing the replacement machinery even in the year when provision for rehabilitation is being made. That amount is deducted from the price of the machinery which will be required to be purchased in order to determine what amount the industry is going to require for rehabilitation in spite of having been allowed depreciation. In our view, therefore this Court, when it later held that the depreciation and general liquid reserves available are to be deducted in calculating the rehabilitation amount did not intend to lay down that the depreciation must also be available in the year of bonus.The words available to the employer" were intended to qualify the expression "general liquid reserves" only and not the word "depreciation". General liquid reserves are to he deducted on the principle that if such reserves are in the hands of the industry and are not earmarked for binding purposes, the industry must utilise those reserves for rehabilitating the old machinery instead of asking for provision to be made out of profits in the year of bonus and in future years. The principle adopted is that provision for rehabilitation is to be made only to the extent of the difference between the price of the machinery which will have to be paid for replacing the odd machinery and the amount of depreciation provision shown in the accounts according to the commercial system of accounting and even that rehabilitation requirement must first be met by the industry out of available liquid reserves rather than by asking for provision to be made out of profits. In the present case, the Tribunal, when calculating the provision for rehabilitation, took the entire price of the replacement machinery as required to be provided out of profits and did not take into account that that price should have been reduced to the extent of the depreciation provided for in the accounts. The annual report of this Company for the year of bonuswas produced before us and at page 24 it showed that at the beginning of the yeardepreciation to the extent of Rs. 325.48 lacs had been provided in theof the Company. This amount has, therefore, to he deducted from the price of the machinery which is to replace the original machinery when rehabilitation is resortedet of the Company contained in the Annual Report, various kinds of reserves have been shown. There was a reserve for contingencies to the extent of Rs. 10.00 lacs onand a development rebate reserve of Rs. 39.51 lacs on the same date. On behalf of the workmen, it was urged that this amount of Rs. 39.51 lacs should at least be deducted when calculating the requirement for rehabilitation. From theitself an inference was sought to be drawn that this reserve existed in the form of a liquid reserve available for rehabilitation. For this purpose reference was made to the entries on the assets side of thewhich shows a sum of Rs. 220 lacs as lying in fixed deposit account. The argument was that if the Company had such a large sum as Rs. 220 lacs in the fixed deposit account, it could not possibly urge that the sum of Rs. 39.51 lacs in respect of development rebate reserve was not a part of it and was not available as a liquid reserve. It is but natural that in thethe Company could not show any correlation between the amounts entered on the two sides, liabilities and assets, as that is not required by any principle of commercial accounting. The argument of learned counsel for thethat this development rebate reserve had been used as a part of the working capital of the Company represented by various items shown on the assets side and this fact was proved by the affidavit of Satya Narayan Murarka, Commercial Manager of the Company, who categorically stated that all the reserves had been utilised as part of the working capital. It seems to us that a mere statement by the Commercial Manager that the reserves have been utilised in the working capital cannot be accepted as conclusive evidence of that fact. When theitself shows that cash amounts in the form of fixed deposits were available which were far in excess of the development rebate reserve in question, there would be no justification for holding that this development rebate reserve was not available as a liquid asset and had been included by the Company in its working capital. At this stage, it is not necessary; therefore, to go into any further details to arrive at the conclusion that this development rebate reserve was a liquid asset available for rehabilitation and, consequently, liable to be deducted when calculating the rehabilitation requirement. We shall deal in greater detail with the question of what items were included in the working capital at a later stage when dealing with the controversy relating to the claim of the Company for return on working capital which is allowed under the Full Bench Formula, when calculating the surplus available for distribution of bonus.28.On the question of calculation for provision for rehabilitation the only point raised on behalf of the workmen with regard to buildings was that the Tribunal, in taking the life of the factory buildings at 25 years andbuildings at 40 years, was not correct and that the life of the two types of buildings should have been taken at 40 years and 50 years respectively.At the time of the hearing before the Tribunal, the Company had claimed that factory buildings have a normal life of 25 years only andbuildings 30 years, while the claim of the workmen was that the factory buildings had a life of 40 years and thebuildings 50 years.In arriving at its decision, the Tribunal primarily took into account the provisions of Rule 8 of the Rules framed under theAct, 1922 which lays down the principle for calculation of depreciation in respect of buildings. That principle, no doubt, cannot be taken as giving any correct indication of the life of buildings for purposes of calculation of rehabilitation provision, but, in this case, there was the difficulty that the Tribunal did not accept the evidence given by the Company to prove the age of the buildings as claimed by it, while no evidence was given on behalf of the workmen in support of their claim that the life of the buildings should be taken at the figures contended on their behalf. In the course of arguments before us, all that learned counsel did was to refer to the decision of this Court in the Associated Cement Companies Ltd. case, 1959 SCR 925   = (AIR 1959 SC 967  ) (supra) at p. 993 (of SCR) = (at p. 1001 of AIR) where the calculations made in the Chart show that the life of the various buildings concerned in that case were taken to be between 30 and 35 years. We do not think that in the absence of evidence showing that the buildings of the Company were similar to those buildings whose life came up for consideration in the case cited above, it is possible to derive any assistance from the figures accepted in that case. In these circumstances, the position before us is that neither on behalf of the Company, nor on behalf of the workmen is there any reliable evidence brought to our notice on the basis of which we can arrive at a correct estimate of the life of the buildings of the Company and consequently, we do not think that there will be any justification for US to vary the decision given by the Tribunal in this