Judgment Case ID: 3088

Judgment:
Appeal No. 855 of 1968. Appeal by Special Leave from the Award dated October 26	 1967 of the National Industrial Tribunal	 Calcutta in Reference No. NIT 3 of 1967. D. N. Mukherjee	 for the appellant. P. section Khera and section K. Nandy	 for respondents Nos. 1 and 3. The Judgment of the Court was delivered by Vaidialingam	 J. This appeal	 by special leave	 is directed against the Award dated October 26	 1967 of the National In dustrial Tribunal	 Calcutta in Reference No. NIT 3 of 1967	 holding that for the accounting year 1965 66	 the quantum of bonus payable by the appellant to its workmen is 20% of the effective salaries or wages with a further direction to set on a sum of Rs. 1	46	252. The appellant	 Indian Cable Company Ltd. (hereinafter to be referred as the Company) occupies a very prominent position in the Cable Industry of India having its Head Office at Calcutta and its factory at Jamshedpur. It has	 branches in Bombay	 Madras	 New Delhi	 Kanpur	 Ahmedabad	 and Bangalore. (In addition to insulated cables	 the Company manufactures Aluminium Rods	 Radio Aerials	 Fuse Wires and other products.). Its paid up capital is Rs. 2	48	65	450. It employed workmen numberingover 5000. The gross effective salaries and wages of its employees for the relevant accounting year amounts to Rs. 1	05	32	880. Its accounting year is from 1st April to 31st March of the succeeding year. For the accounting year 1964 65	 the Company declared and paid bonus at 20% to all employes in accordance with the provisions of the (hereinafter to be referred as the Act). For the year in question 1965 66	 it calculated a sum of Rs. 23	68	785 as available surplus. This amount was arrived at by the Company after calculating direct tax without deducting the provision for payment of bonus payable to its workmen. A sum of Rs. 14	21	271 being 60% of the said available surplus was declared as bonus for the year 1965 66. This amount represented 13 51% of the wage bill. The workmen were dissatisfied with this offer of bonus at 13.51% and demanded payment of bonus at the maximum rate of 20% as provided in the Act. In consequence they raised a dispute with the Company. In view of the agreement dated November 24	 1966 between the parties to refer the claim for additional bonus for adjudication to a Tribunal	 the workmen received the bonus at 108 the rate of 13.51% offered by the Company. The Central Government by order dated June 23 1967 referred for adjudication to the National Industrial Tribunal	 Calcutta	 the following dispute "What should be the quantum of bonus payable to the Workmen of the Indian Cable Company Limited Calcutta for the accounting year 1965 66" The Unions contended before the Tribunal that the computa tion of allocable surplus by the Company has not been properly made in accordance with the Act and that several items shown in the profit and loss account as expenditure have to be added back to arrive at the actual gross profits. The Unions further alleged that the Company has spent large amounts for payment of liability for future years with a view to reduce the available and allocable surplus	 which in consequence has resulted in	 the reduction of percentage of bonus. The Company on the other hand maintained that it has kept proper accounts which have been audited by a reputed firm of auditors Messrs Lovelock & Lewes and that the computation of allocable surplus has been properly arrived at having due regard to the provisions of the Act. The Com pany denied the allegations of the Unions that enormous expenditure has been shown with a view to reduce the quantum of bonus. On the other hand	 the Company pleaded that all items of expenditure were justified and those items are deductable in considering	 the claim for bonus. At this stage it may be mentioned that the Unions served interrogatories requiring information on various matters and there is no controversy that the Company furnished all the informations that were 'Called for. Before the Tribunal the Company required various deductions to be made from the net profits shown in its profit and loss account. On the other hand	 the Unions required various items to be added back. The Tribunal accepted the contentions of both the parties with regard to certain items. We will in due course refer to the items which are in dispute before us at the instance of both the Company and the Unions. The Tribunal computed the	 available surplus at Rs. 37	54	713	 60% of this amount being Rs. 22	52	828 was fixed as allocable surplus. The Tribunal held that a sum of Rs. 21	06	576 being bonus at 20% of the gross effective salaries and wages was payable for the year in question and it directed the surplus amount of Rs. 1	46	252 to be set on. As the bonus at the rate of 13.51% had already been declared and paid by the Company	 the Tribunal directed the payment of the balance 6.49% within the period mentioned 109 in the Award. One aspect which has to be acted is that (in calculating the available surplus	 the Tribunal before calculating the notional direct tax	 deducted the bonus payable for the accounting year in question. The grievance of the Company	 as placed before us by its learned counsel Mr. D. N. Mukherjee	 relates to three items (1) the method of computation of notional direct tax; (2) disallowance of the deduction from gross profits of the sum of Rs. 2.65 lakhs made as ex gratia payment for the accounting year 1964 65 to employees drawing emoluments exceeding Rs. 750 per mensem; and (3) disallowance of the claim for re 'turn on provision for doubtful debts. The first contention relates to the principle to be adopted for calculating direct tax when computing the available and allocable surplus for payment of bonus under the Act. According to the Tribunal	 under sections 6 and 7 of the Act	 the bonus payable for 	the relevant accounting year has to be deducted from the grossprofits for calculation of direct tax or alternatively rebate for bonus found payable has to be calculated and 60% of the rebate has to be added back as allocable surplus. The Tribunal took notice of the fact that the Income tax Authorities did not object to deduction of the provision made by the Company for payment of bonus for the accounting year 1965 66. On this reasoning the Tribunal added back to the gross profits as per the profit and loss account the provision made for payment of bonus. For coming to this view the Tribunal followed its previous decision in Indian Oxygen Ltd. vs Their Workmen (N.I.T. 1 of 1966). The Tribunal has also noted that its Award in the Indian Oxygen Ltd. was pending appeal in this Court. According to Mr. D. N. Mukherjee	 this method of calculation of direct tax under the Act	 adopted by the Tribunal is contrary to the decisions of this Court. 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. section Khera	 learned counsel for the Unions was unable to support the reasoning of the Tribunal on this aspect. The question of calculation of direct tax under the Act was considered for the first time by this Court in Metal Box Co. of India Ltd. vs Their Workmen.(1) It was held therein that the nationalc tax liability is to be worked out by first working out the gross profits and deducting therefrom the prior charges under section 6	 but not the bonus payable to the employees. Therefore	 it is clear from this decision that an employer is entitled to deduct (1) ; 110 his tax liability without deducting first the amount of bonus he would be liable to pay from and out of the amount computed under sections 4 and 6 of the Act. The same principle	 has been reiterated in The Workmen of William Jacks and Company Ltd. Madras vs Management of William Jacks and Co.	 Madras	(1) Delhi Cloth and General Mills Co. Ltd. vs Workmen(2) and Indian Oxygen Ltd. etc. vs Their Workmen. (3) 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 therefrom 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 appellant. 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. section N. Banerjee	 it is seen that the Company in appreciation of the officer 's 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. He 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 (1) ; (2) ; (3) ; 111 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 in the profit and loss account. Mr. Mukherjee urged that the Company was justified in claiming the above amount by way of deduction. He referred us to the definition of "employee" in section 2(13) of the Act as also to the employees declared eligible for bonus under section 8. He also relied on sections 10 and 11 which make it obligatory on an employer to pay the minimum bonus and also the maximum bonus upto 20% respectively. 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 section 2(13)	 among other things	 he is a person drawing a salary or wage not exceeding Rs. 1600 per mensem. Under section 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 section 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	 upto 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 the Act. It is no doubt true that an officer drawing a salary not exceeding	 Rs. 1600 per mensem is an employee under section 2(13) and he will also be eligible for payment of bonus under section 8 read with sections 10 and 11 of the Act. But 	the point that is missed by the learned counsel is the limitation 112 contained in section 12. Though officers drawing salary upto Rs. 1600 per mensem are employees under section 2 (13) and eligible for bonus	 still for purposes of calculation of bonus payable under sections 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 for 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 totalling 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 profits. The third item relates to return on provision for doubtful debts. The Company had calculated return of Share capital and Reserves. It further claimed a return at 6% on Rs. 2.5 lakhs	 which according to it was a revision for doubtful debts. The amount claimed as return under this head was Rs. 15	000 and the Company claimed to deduct this amount from the gross profits as an item of expenditure. The Tribunal has rejected this claim of the Company. It is not necessary for us to dwell on this point at any great length in view of the decision of this Court in Indian Oxygen Ltd. etc. vs Their Workmen(1)	 where the decision of the Tribunal directing such an amount to be added back in computing the gross profits has been approved. The legal position has been dealt with in the said _judgment. Accordingly	 we hold that the Tribunal was justified in adding back the said amount to gross profits. Mr. P. section Khera	 learned counsel for the Unions has contended that the Tribunal was not justified in allowing deduction of certain items from the gross profits for purposes of computing the available and allocable surplus. The Unions no doubt have not filed any appeal. In fact in the particular circumstances of this case the could not have filed an appeal because they have been awarded the maximum 20% allowable under the Act. But	 according to Mr. Khera	 if the items on which he has relied on had been added back	 the Award of the Tribunal can be maintained even on the basis that the principle adopted by the Tribunal in respect of direct tax is found to be erroneous by this Court. (1) ; 113 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 or 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. vs Industrial Tribunal	 Rajasthan etc. (" ') 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 vs J. K. Synthetics Mazdoor Union(1)	 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 'the 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 Court as follows : "On behalf of the management the right of the union to challenge the multiplier and divisor	 in the absence of an appeal by it	 is strenuously contested but in our view there is little force in this objection. The appeal by the employer is against the grant of bonus to	 the employees which implies that the method of computation of the gross profits	 as well as of the available surplus and the rate at which the bonus is granted can subjected to scrutiny. It is needless to recount the several priorities that have to be deducted and the items in respect of which amounts have to be added	 before arriving at the available surplus. In an appeal	 the sevetat steps which have to be taken for computation of the available surplus	 either in respect of the actual amounts or the method adopted	 can be challenged. If so	 the union	 even where it has not appealed against 	the award	 can support it on a method of computation	 which may not have been adopted by the Tribunal but nonetheless is recognised by the Full Bench formula of this Court so longing in the final result the amount awarded is not exceeded. We are supported in this view by a decision of this Court in Management of Northern Railway Cooperative Society Ltd. vs Industrial Tribunal	 Rajasthan	 (1) ; (2) 114 Jaipur and another(1)	 where it was held that the respondents were entitled to support the decision of the Tribunal even on grounds which were not accepted by the Tribunal or on other grounds which may not have been taken notice of by the Tribunal while they were patent on the face of the record. " In the said decision this Court also found support for the above view in the decision of Ramanbhai Ashabhai Patel vs Dabhi Ajitkumar Fulsinji and others(1)	 though the latter decision related to an election appeal. 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 relates 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 exhibit 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 section 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. The contention on behalf of the Unions is that under the Re tirement Gratuity Scheme	 which is in force	 a workman retires at the age of 60 and normally during the year 1965 66	 the payment of gratuity to persons so retired would have come to Rs. 1.21 lakhs. Therefore	 it was argued that the payment of Rs. 18.24 lakhs and odd paid as lumpsum under the Voluntary Retirement Scheme during the year 1965 66 was not proper as that amount would have in the ordinary course been spread over eight or ten years. The Tribunal has rejected this claim of the Unions	 and in 		our opinion	 quite rightly. If there had been a retrenchment and compensation had been paid to all these workmen	 ;the Unions cannot raise any objection in law to the payment of such amount. (1) ; (2) [1965]1 S.C.R. 712. 115 If retrenchment had been restored	 the junior most men under the principle "last come first go" would have been sent out of service. On the other hand	 the Voluntary Retirement Scheme enabled the younger workmen to continue in service while it offered a temptation for the older employees to retire from service. The Voluntary Retirement Scheme has not been challenged	 as mala fides by the Unions. We are in agreement with the view of the Tribunal that the payment of compensation to induce the workmen to retire prematurely was an item of expenditure incurred by the Company on the ground of commercial expense in order to facilitate carrying on of the business and it was an expenditure allowable under section 37(1) of the Income tax Act. It was not an expenditure of a capital nature. The Tribunal was justified in declining to add back this item of expenditure to the gross profits. The 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 section 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 vs The Jabalpur Electric Supply Co. Ltd. and another. (1) The third item objected to by the Unions related to the ex penditure 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 (1) A.I.R. 1972 S.C.70 116 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. 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. 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. 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. 117 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 The accounting year 1965 66 on the basis of our judgment will be as follows Rs. Rs. Gross Profit as pier Award 216	16	195 of National Tribunal Less (1) Depreciation admissible under section 32 (1) of I.T. Act. 36	10	594 (2) Development Rebate admissible 6	76	22442	86	818 1	73	29	377 Less: Direct Tax as Per cl. 6 (c) including Di vidend Tax 99	45	814 73	83	563 Less Statutory Deductions Share Capital Rs. 248	65	45021	13	56349	22	387 @ 8 .5%. Reserves Rs. 46	81	37	73928	08	824 @ 6% (without tak ing into account 6 % of Rs. 250	000/ be ing provision for Doubtful debts) Available Surplus. 24	61	176 Allocable Surplus60% of above 14	76	706 Effective Gross salary 105	32	880 Bonus paid @ 13.51% 14	22	992 Balance .51% 53	714 14.02% 14	76	706 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. The Award of the Industrial Tribunal is accordingly modified and the appeal allowed in part. Parties will bear their own costs. G.C Appeal allowed in part.

Summary:
The appellant company declared bonus for the year 1955 56 at 13.51% The workmen demanded bonus at the rate of 20%	 the maximum provided in the Payment.of Bonus Act	 1965. The dispute about the rate of bonus and calculation of the available surplus was referred to the Industrial Tribunal. The Tribunal held that a sum of Rs. 21	06	576 being bonus at 20% of the gross effective salaries and wages was payable for the year in question and it directed the surplus amount of Rs. 1	46	252/ to be set on As the bonus at the rate of 13.51 % had already been declared and paid by the Company	 the Tribunal directed the payment of the balance 6.49% within a prescribed period. In appeal to this Court against the Tribunal 's award the appellant company contended : (i) that the Tribunal erred in holding that under sections 6 and 7 of the the bonus payable for the relevant accounting year has to be deducted from the gross profits for the calculation of direct tax	 (ii) that the Tribunal erred in refusing to deduct from the gross profits the ex gratia payment made to employees in respect of salary above the ceiling of Rs. 750 fixed by the Act. (iii) that the Tribunal wrongly refused to deduct the reserve for doubtful debts from the gross profits. On behalf of the respondent workmen it was urged that the Tribunal was not justified in allowing deduction of certain items from the gross profits for purposes of computing the available and allocable surplus. HELD : (i) In the case of Metal Box Co.	 it was held by this Court that the notional tax liability is to be worked out by first working out the gross profits and deducting therefrom the prior charges under section 6	 but not the bonus payable to the employees. It is clear from the above 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 sections 4 & 6 of the Act. This principle has been upheld by the Court in later cases. This Court has also held that the amendment of the Act in 1969 has not effected any change in the earlier decision that the tax liability under the Act is to be workedout firstby working out the gross profits and deducting therefrom bonuspayableto the employees. It followed that the Tribunal committed anerror inlaw in computing direct tax after deducting bonus. [109H 110D] Metal Box Co. of India Ltd. vs Their Workmen	 [1969]1 S.C.R. 750	 The Workmen of William Jacks	 and Company Ltd. Madras vs Management of William Jacks and Co. Ltd.	 Madras	 A.I.R. 1971 S.C. 08SupCI/72 106 1821	 Delhi Cloth and General Mills Co. Ltd. vs Workmen ; and Indian Oxygen Ltd. etc. vs Their Workmen; 	 applied. (ii) Though officers drawing salary upto Rs. 1600 per mensem are employees under section 2(13) of the Act and eligible for bonus	 the salary or wages per month will be taken at the maximum of Rs. 750/ permensem. What the company had done was to pay such men not only the bonus as calculated under the Act	 but also in additional amount representing bonus on the emoluments above the ceiling of Rs. 750/ . Such additional amount paid to all such officers totalling Rs. 2.5 lakhs could not be considered to be an expenditure debited directly to Reserves. The Tribunal was justified in adding back this amount to the gross profits. [12A C] (iii) In view of the decision of this Court in Indian Oxygen Ltd. the Tribunal 's decision adding back the deduction claimed by the appellant on account of return on the provision for doubtful debts must be upheld. [112E F] (iv) The respondents were entitled to support the decision of the Tribunal even on grounds which were not accepted by the Tribunal or on other grounds which may not have taken notice of by the Tribunal while they were patent on the face of the record. [113A	 114A B] Management	 of Northern Railway Co operative Society Ltd. vs Industrial Tribunal	 Rajasthan et. ; ; J. K. Synthetics Limited vs J.K. Synthetics Mazdoor Union	 and Ramanbhai Ashabhai Patel vs Dabhi Ajitkumar Fulsinji and others; 	 	 followed. (v) The Voluntary Retirement Scheme had not been challenged as mala fide by the Unions. The payment of Compensation. to induce the workmen to retire prematurely was an item of expenditure incurred by the company on the ground of commercial expense in order to facilitate carying on of the business and it was an expenditure allowable under section 37(i) of the Income tax Act. It was not an expenditure of a capital nature. The Tribunal was justified in declining to add back this item of expenditure to the gross profits. [115B C] (vi) The Company had filed an appeal against the order of the Income tax officer postponing consideration of the company 's claim for extra shift allowance. The Company had produced figures of depreciation and that had not been subjected to any serious challenge by the Unions. In the circumstances the Tribunal rightly refused to add back the amount claimed by the Company as extra shift allowance. [1 15F G] Jabalpur Bijlighar Karamchari Panchayat vs The Jabalpur Electric Supply Co. Ltd. and another	 A.I.R. 1972 S.C.70 applied. (vii) The amount claimed by the Companyin respect of repairs and renewals was supported by evidence and had been accepted by the auditors. The contention of the Unions that the Company was not justified in incurring the said expenditure had been rightly rejected by the Tribunal. [1 15A] (viii) Since from the evidence produced on behalf of the company it was clear that there was no surplus after paying bonus for 1964 65 the question of set on for the next year did not arise. The plea of the Unions in this regard had to be rejected. [116F] [After working out the available and allocable surplus on the basis of the above findings the Court fixed the bonus payable at 14.02%].