The Sree Meenakshi Mills, Ltd. Vs.
Their Workmen  INSC 96 (5 November 1957)
BHAGWATI, NATWARLAL H.
IMAM, SYED JAFFER
CITATION: 1958 AIR 153 1958 SCR 878
surplus-Determination of- Depreciation allowable under income-tax Act, if can
be deducted as prior charge-Part of depreciation claimed disallowed-Provision
for higher amount of income-tax, if can be allowed-Appellate Tribunal's Power
The workmen demanded bonus for the year
1950-5, on the allegation that the employers had made profits during the
relevant year. The employers resisted the demand on the ground that 879 there
was a trading loss in the year and as such no bonus was payable. To determine
the available surplus out of which bonus was to be paid, the employers deducted
out of their gross profits an amount for depreciation admissible under the
Income-tax Act. The industrial tribunal disallowed a portion of the
depreciation and found that there were profits in the relevant year and awarded
three months bonus to the workmen. The employers preferred appeals to the
Labour Appellate Tribunal but they were dismissed. The employers then applied
to the Appellate Tribunal for a review and the Tribunal dismissed the
application holding that it had no power to review its own decision and that
even if it had the power it would not grant the review as no case for review
had been made out.
Held, that the whole of the depreciation
admissible under the Income-tax Act is not allowable in determining the
available surplus. The initial depreciation and the additional depreciation are
abnormal additions to the income-tax depreciation and it would not be fair to
the workmen if these depreciations are rated as prior charges before the
available surplus is ascertained. Considerations on which the grant of
additional depreciation may be justified under the Income-tax Act are different
from considerations of social justice and fair apportionment on which the
original Full Bench formula in regard to the payment of bonus to the workmen is
based. That is why only normal depreciation including multiple shift
depreciation should rank as prior charges.
U.P. Electric Supply Co. Ltd. v. Their
Workmen,  L.A.C. 659, approved.
The Labour Appellate Tribunal had the power
to review its own orders.
M/s. Martin Burn Ltd. v. R. N. Banerjee,
 S.C.R .5I4, followed.
The method adopted by the industrial
tribunals in deter- mining the trading profits of the employer is an industrial
dispute, does not conform to the requirements and provisions of the Income-tax
Act, and it would, therefore, be fallacious to assume that gross profits
determined by the industrial tribunal can be taken to be gross profits that
would necessarily be taxable under the Income-tax Act. In determining the
available surplus for payment of bonus provision for a higher amount of
incometax cannot be made merely because the claim to initial and additional
depreciation has been disallowed which increase the amount of gross profits.
CIVIL APPELLATE JURISDICTION: Civil Appeal
No. 217 of 1956.
Appeal by special leave from the decision
date 880 December 7, 1953, of the Labour Appellate Tribunal of India, Madras, in Misc. Case No. 111-C. 387 of 1953.
A. V. Vishwanatha Sastri and S. Subramanian
for the appellants.
M. S. K. Sastri, for the respondents.
1957. November 5. The following Judgment of
the Court was delivered by GAJENDRAGADKAR J. These three appeals arise out of
two industrial disputes Nos. 24 and 26 of 1951 between the appellants and their
workmen. Dispute No. 24 of 1951 had arisen between the management and workers
of the Sree Meenakshi Mills Ltd., Madurai, whereas dispute No. 26 of 1951, was
between the management and workers of the Thiakesar Alai Manapparai. Both the
disputes were in respect of bonus claimed by the workmen for the year 1950-
51. The workmen claimed bonus for the year
1950-51 on the allegation that the two mills constituted one unit and had made
profits during the relevant year. On the other hand, the appellants contended
that the two mills were two different units and the claims for bonus made by
the workmen against them should not be considered together. According to the
appellants, during the relevant year there was a trading loss and as such no
bonus was payable to the workers. The Industrial Tribunal rejected the pleas
raised by the appellants and held that the two mills formed part of the same
unit. It also came to the conclusion that for the year in question there was a
surplus of Rs. 2,87,676 against which the workmen's claim for bonus was
justified. That is why the tribunal awarded three months' bonus to the workmen.
Against this decision the appellants
preferred two appeals Nos. 133 and 134 of 1952 to the Labour Appellate Tribunal
of India at Madras. In these appeals the appellants challenged the findings
made by the tribunal against them and urged that bonus was not payable during
the relevant year. The workmen also preferred an appeal, No. 168 of 1952, and
in this appeal they claimed a larger bonus than what had been awarded by the
tribunal below. The 881 appellate tribunal confirmed the finding of the
tribunal that the two mills formed part of the same unit. According to the
appellate tribunal, the net surplus available for distribution as bonus came to
Rs. 2,57,496. The claim made by the appellants in respect of various deductions
was examined by the appellate tribunal and deductions were substantially,
disallowed in respect of three items. In respect of an amount of Rs. 8,43,927
claimed by the appellants as depreciation on machinery and buildings the
appellate tribunal concurred with the industrial tribunal in holding that the
claim only for a sum of Rs. 4,00,000 was admissible; in other words, a claim
for deducting the balance of Rs. 4,43,927 was disallowed. It is this finding in
particular with which we are directly concerned in the present appeals. it may
be pointed out at this stage that in determining the amount of net surplus
available for distribution as bonus, the appellate tribunal agreed with the
industrial tribunal that the provision for taxation made by the appellants to
the extent of Rs. 1,75,000 was adequate. In the result, the appeals preferred
by the appellants as well as the respondents failed and were dismissed by the
appellate tribunal. Against the order dismissing their appeals, the appellants
have preferred to this Court by special leave the present Civil Appeals Nos. 218
and 219 of 1956.
The appellants had also preferred an
application for review before the Labour Appellate Tribunal, Misc. Case No.
III-C- 387 of 1953 (Review) on the ground that the order passed by the Labour
Appellate Tribunal was patently erroneous inasmuch as there was a mistake
apparent on the face of the record which should be corrected under the
appellate tribunal's powers of review. The appellate tribunal hold that it had
no power of review and that,- even if it bad such a power, no case had been
made out for the exercise of such power because there was no mistake apparent
on the face of the record which could not have been discovered whet) the order
was made in the presence of the parties. Against this decision, the appellants
have preferred to this Court by special leave the present Civil A peal No. 217
882 In appeals Nos. 218 and 219 of 1956, the
main point which has been urged before us on behalf of the appellants is that
the appellate tribunal erred in law in disallowing the appellants' claim in
respect of depreciation debited by the appellants to the extent of Rs.
4,43,927. In the appeal preferred against the order passed by the appellate
tribunal refusing to review its decision, it has been urged before us by the
learned counsel for the appellants that the appellate tribunal was in error in
holding that it had no jurisdiction to review its decision under 0. 47 of the
Code of Civil Procedure. It has also been argued that on the merits it was
wrong to have held that the appellants had failed to make out a case for the
exercise of the said jurisdiction.
It may be relevant at this stage to set out
the financial position of the appellants during the relevant year as summed up
in the judgment of the appellate tribunal:
"Net Profit as per Ex. M. 1 ... Rs.
2,40,302 Add the sum wrongly debited as cost of repairs etc.
(Rs. 2,57,793 minus Rs. 1,00,000)
...Rs.1,57,793 Add bonus for the year 1949-50 wrongly debited to 1950-51.
....Rs.1,49,920 Add bonus paid to clerical staff for 1950-51 ....Rs.37,896 Add
depreciation debited by the company: ....Rs.8,43,927 Add provision for
taxation: .....Rs.1,75,000 Add donation to a College: .....Rs.40,000 Total
......Rs. 16,44,838 Thus the gross total profit comes to Rs. 16,44,838.
From this the following deductions have to be
Depreciation allowed : Rs.4,00,000 Bonus for
the year 1950-51 paid to clerical staff: Rs.37,896 Provision for taxation;
Rs.1,75,000 883 Return on capital (preference and ordinary shares) :. Rs.
2,94,500 Return on the reserve used as working capital at 4 per cent.: Rs.
2,23,946 Provision for rehabilitation (Rs. 6,56,000 minus Rs. 4,00,000): Rs.
2,56,000 Total ...Rs 13,87,342 Thus the net surplus available for distribution
as bonus comes to Rs. 16,44,838 minus Rs. 13,87,342. Rs. 2,57,496." Since
in the present appeals we are concerned only with the amount of depreciation
debited by the appellants, it would be useful to set out the depreciation
analysis as explained by the representative of the appellants in the Court of
the Industrial Tribunal. The depreciation analysis, according to this
statement, is made thus as per the Income- tax Act:
Normal. Extra. Initial.
"(245 days) Madurai. 3,17,331 38,465
2,87,250 (250 days) Usil- 2,23,206 Including ampatti extra. 16,077.
" It would be noticed that the total of
these amounts comes to Rs. 8,82,329.
The true nature and character of the
workmen's claim for bonus against their employers is now well settled. Bonus is
not, as its etymological meaning would suggest, a mere matter of bounty
gratuitously made by the employer to his employees ; nor is it a matter of
deferred wages. It has been held by this Court in Muir Mills Co. Ltd. v. Suti
Mills Mazdoor Union, Kanpur (1) that " the term 'bonus' is applied to a
cash payment made in addition to wages. It generally represents the cash
incentive given conditionally on certain standards of attendance and efficiency
being attained." This decision is based on the view that both labour and
capital contribute to the earnings of the industrial concern and so it is but
fair that labour should derive some benefit if there is (1)  I S.C.R.
112 884 surplus available for that purpose.
Even go, the claim for bonus cannot be effectively made unless two conditions
are satisfied; the wages paid to workmen fall short of what can be properly
described as living wages; and the industry must be shown to have made profits
which are partly the result of the contribution made by the workmen in
In determining the question as to whether the
industry has made profit, and, if so, how much is the net surplus in a given
year, provision has first to be made in respect of prior charges. This
principle has been recognized by what is often described as the Full Bench
formula as laid down in the matter of The -Mill Owners Association, Bombay v.
The Rashtriya Mill Mazdoor Sangh, Bombay (1). According to this formula,
distributable surplus has to be ascertained after providing from the gross
profits for (1) depreciation, (2) rehabilitation, (3) return at 6% on the
paid-up capital, (4) return on the working capital at a lesser but reasonable
rate, and (5) for an estimated amount in respect of the payment of income-tax.
It is common ground before us that the question as to whether the workmen's
claim for bonus is justified or not must be decided in the light of this Full
The appellants concede that in determining
the question as to whether they have made a trading profit during the relevant
year the industrial tribunal is not required to adopt the same basis as under
the Income-tax Act. It is, however, urged that in dealing with this question
there is no justification for not giving effect to the relevant provisions of
the Income tax Act in respect of depreciation.
Section 10 of the Income-tax Act provides for
three kinds of allowances in respect of depreciation. Section 10 (vi) deals
with allowances in respect of depreciation of buildings, machinery, plant or
furniture used for the purposes of the business, being the property of the
assessee, of a sum equivalent to such percentage on the original cost thereof
to the assessee as may in any case or class of cases be prescribed and in any
other cases, to such percentage on the written-down value thereof as may in
(1)(1950) 2 L. L. J. 1247.
885 any case or class of cases be prescribed.
This allowance is in respect of what is described as normal depreciation.
Section 10 (vi) further provides for what is
described as initial depreciation in cases where the buildings have been newly
erected or the machinery or plant being new, (not being machinery or plant
entitled to the development rebate under el. (vi-b)), has been( installed after
March 31, 1945, a further sum (which shall however not be deductible in
determining the written-down value for the purpose of this clause) in respect
of the year of erection or installation as prescribed by cls. (a), (b) and (c)
of s. 10 (vi). Then s. 10 (vi-a) provides for allowances of what is described
as additional depreciation. This is in respect of depreciation of buildings
newly erected or of machinery or plant being new which has been installed after
March 31, 1948. Section 10 (vi-b) also provides for allowance "in respect
of machinery or plant being new, which has been installed after the 31st day of
March, 1954, and- which is wholly used for the purposes of the business carried
on by the assessee, a sum by way of development rebate in respect of the year
of installation equivalent to twenty-five per cent. of the actual cost of such
machinery or plant to the assessee: Pro- vided that no allowance under this
clause shall be made unless the particulars prescribed for the purpose of
clause (vi) have been furnished by the assessee in respect of such machinery or
plant." The question which arises for decision is whether, in determining
the question as to whether net surplus is available for distribution by way of
bonus or not, it is obligatory on the industrial tribunals to allow the whole
of the depreciation admissible under the said provisions of the Income-tax Act.
Before dealing with this question, it may be
relevant to mention one fact on which both the tribunals below have placed
emphasis in the present case. It appears that, when the proceedings were
pending before the industrial tribunal, an application was made by the workmen
requesting the tribunal to direct the appellants to allow the workmen
inspection of accounts. The Tribunal passed an order for inspection and
inspection 886 was allowed. Thereupon an application was made on behalf of the
workmen on February 28, 1952, for particulars relating to the amount of Rs.
8,44,000 claimed by the appellants by way of depreciation. The appellants
promised to supply the information on March 8, 1952 ; but ultimately, on behalf
of the appellants, it was stated to the tribunal that the appellants were not
able to give the details called for.
The industrial tribunal and the appellate
tribunal have both adversely commented on this conduct of the appellants and
they were presumably disposed to draw an adverse inference against the
appellants in respect of the amount of depreciation in question. Mr. Viswanatha
Sastri, for the appellants, however, contended before us that though the
tribunals below may have been justified in commenting on the default of the
appellants to supply the particulars, that itself would not justify a drastic
reduction in the amount of depreciation claimed by the appellants. He argues
that the balancesheet of the appellants has been duly audited and it was not
reasonable for the tribunals to have disallowed such a large amount as Rs.
4,43,927 under the claim of depreciation. It is fairly conceded by him that if
the tribunals below were not bouns to grant claims for depreciation on what is
described as initial and additional depreciations, then he could not challenge
the propriety or correctness of the decision of the tribunals in disallowing
the items appearing in the depreciation account in respect of these
depreciations. It is in the light of these facts that the question raised by
the appellants must be considered.
This question has been decided by a Full
Bench of the Labour Appellate Tribunal in U.P. Electric Supply Co. Ltd. v.
Their Workmen (1). It is true that the question of bonus had to be considered
in this case in the light of the provisions of the U. P. Electricity (Supply)
Act, 1948. Nevertheless the Full Bench has dealt with this matter on general
considerations and has set at rest the divergence of views expressed by
different Benches of the tribunal on this point. According to this decision,
the initial depreciation and additional depreciation (1)  L.A.C. 659.
887 are in a sense abnormal additions to the
income-tax depreciation and they are designed to meet particular contingencies
'and for a limited period. It would, therefore, not be fair to the workmen that
these two depreciations are rated as prior charges before the available surplus
is ascertained. It is likely that, in many cases, if these two depreciations
are allowed as prior charges no surplus would be left even though workmen may
have laboured during the year to the best of their ability and the concern was
for all purposes prosperous. In other words, according to this decision,
considerations on which the grant of additional depreciation may be justified
under the Income-tax Act are different from considerations of social justice
and fair apportionment on which the original Full Bench formula in regard to
the payment of bonus to the workmen is based. That is why, in the result, this
subsequent Full Bench held that only normal depreciation including multiple
shift depreciation, but not initial or additional depreciation, should rank as
prior charge in applying the Full Bench formula as to the payment of bonus.
If it cannot be disputed that in industrial
adjudication it is not obligatory to adopt the very same procedure as
prescribed by the Income-tax Act for ascertaining gross profits and then
determining the amount of net surplus available, it is not easy to accept the
appellants' argument that in respect of depreciation alone industrial tribunals
must necessarily and in every case follow the relevant provisions of the
Income-tax Act. If that be the true position, then we see no reason why, in
respect of one item of debit only the technical provisions of the Income-tax
Act must be followed in industrial adjudications in respect of workmen's claim
for bonus. On the whole, the reasons given by the appellate tribunal in the
case of The U.P. Electric Supply Co. Ltd. (1) appear to us to be satisfactory ;
and so we are not prepared to accept the appellant's argument that the
appellate tribunal in the present case has erred in law in not allowing the
appellant's claim for initial and additional depreciations. In our opinion,
therefore, the main point urged by the appellants in Appeals Nos. 218 and 219 of
1956 (1)  L.A.C. 659.
888 cannot succeed.
That takes us to the two other points raised
by the appellants in Appeal No. 217 of 1956. The first point which has been
raised in this appeal by the appellants about the jurisdiction of the appellate
tribunal to review its own orders in appropriate cases under O. 47 of the Code
of Civil Procedure. This Court has recently had occasion to consider the
question about the applicability of the Code of Civil Procedure to the
proceedings before the Labour Appellate Tribunal in Mills. Martin Burn Ltd. v.
R. A. Banerjee (Civil Appeal No. 92 of 1957). Section 9(1) and s. 10 of the
Industrial Disputes (Appellate Tribunal) Act, 1950, as well as the relevant
rules and orders framed under the Act were considered and it was held that the
Code of Civil Procedure applies to the proceedings before the appellate
tribunal with the result that the appellate tribunal can exercise its powers
under O. 41, r. 21 as well as under s.
151 of the Code. It is true that in this case
there was no occasion to consider the applicability of the provisions of O. 47
of the Code but that does not make any difference. If the Code of Civil
Procedure applies to the proceedings before the Labour Appellate Tribunal, it
is clear that the provisions of O. 47 would apply to these proceedings as much
as s.151 of the Code or the provisions of O. 41. We must accordingly hold that
the appellate tribunal erred in law in coming to the conclusion that it bad no
jurisdiction to review its own order under the provisions of O. 47 of the Code.
As we have already pointed out, the appellate
tribunal has also held that even if it had jurisdiction to review its decision
or judgment, in the present case it would not grant the appellants' request
because it had not been shown that the order or decision suffered from any
mistake which could not have been known when the order was pronounced in open
court in the presence of both the parties in the present proceedings. Mr.
Viswanatha Sastri, for the appellants, argues that this view is obviously wrong
and -should be reversed. In support of his argument, the learned counsel has
invited our attention to the fact that, when the appeal 889 was pending before
the appellate tribunal, a statement had been filed by the appellants showing
that the provision for income-tax had to be revised in view of the findings
recorded by the industrial tribunal. According to this statement, no surplus
was available for payment of bonus to workmen even on the assumption that the
findings recorded by the tribunal were correct. The appellants pointed out in
this statement that if an amount of Rs. 4,43,927 was disallowed by way of
depreciation that would necessarily add to the amount of gross profits and in
consequence the provision for income-tax would have to be proportionately
increased. The appellants' case was that instead of Rs.1,75,000 which had been
allowed by the industrial tribunal by way of provision for income-tax, it would
be necessary to allow an amount of Rs. 4,75,582 in that behalf.
The appellants' grievance is that though this
statement was filed before the appellate tribunal, the appellate tribunal has
not considered it at all.
On the other hand, it appears from the
judgment of the appellate tribunal that this point was not raised by the
appellants before it in their arguments. No grievance was made and no higher
amount was claimed by them to be reserved for taxation. The appellate tribunal
has also observed that the point raised by the appellants in their review
petition did not show that any new and important matter had been discovered
which, after the exercise of due diligence, would not have been discovered by
the parties at the time of the hearing of the appeal. Besides, the appellate
tribunal also held that there was no mistake apparent on the face of the
record. Technically there may be some force in the observations made by the
appellate tribunal; but we cannot overlook the fact that a written statement
had been filed before the appellate tribunal expressly and specifically raising
this point. That is why we propose to deal with the merits of the argument and
not to reject it on the ground that this argument had not been urged at the
On the merits, the argument is that, if out
of the total amount of Rs. 8,43,927 debited by the appellants to depreciation,
an amount of Rs. 4,43,927 is disallowed, 890 that must inevitably add to the
total amount of gross profits and if the total amount of' gross profits is
increased, logically provision for a higher amount of income-tax must be made.
Thus presented the argument is simple and at first blush appears to be
attractive; but the difficulty in accepting the argument is that the total
amount of gross profits determined by Industrial Tribunals in these proceedings
is not and cannot necessarily be the taxable gross profits of the employer. We
have already observed that in determining the trading profits of the employer
in such disputes, the method adopted by the industrial tribunals does not
conform to all the requirements and provisions of the Income-tax Act, and so it
would be fallacious to assume that the gross profits determined by the
industrial tribunal should be taken to be gross profits that would be
necessarily taxable under the Income-tax Act. Besides, it would be relevant to
remember that the provision for taxation in question has been made by the
appellants themselves and presumably it is based on the appellants anticipation
as to how much approximately they will have to pay by way of income-tax. But,
apart from this consideration, there can be no doubt that the appellants would
get exemption from the payment of income-tax in respect of the amounts of
initial and additional depreciation also as shown in their books of accounts.
That is a right which has been conferred on the appellants by the relevant
provisions of s. 10 of the Income-tax Act; and the benefit which the appellants
are entitled to get under the said section cannot be ignored in deciding
whether or not the provision of the sum of Rs. 1,75,000 for taxation purposes
is adequate or not. We think it is not open to the appellants to contend that
though for the amounts covered by the normal and additional depreciations they
would not be required to pay income-tax, nevertheless they should be allowed to
provide for the payment of income-tax in respect of these two items merely on
the ground that they are disallowed by the industrial tribunal and have thus
added to the total of gross profits as determined by the tribunal.
The adequacy 891 or otherwise of the
provision for income-tax must necessarily be judged in the light of the
income-tax Act since it is under the said Act that the liability to pay tax
would ultimately be determined. Besides, if the appellants' argument is
accepted and an amount notionally payable by way of income-tax in respect of
disallowed items of depreciation is added to the estimated amount of income-tax
provided by the appellants, the very object of disallowing the two items of
depreciation would be substantially defeated. On the other hand, the rejection
of the appellants' argument would not mean any hardship because the additional
amount sought to be added by them in the provision for income-tax would
definitely not have to be paid by them. We are, therefore, satisfied that the
grievance made by the appellants against the order passed by the appellate
tribunal on the ground that it suffers from a mistake apparent on the face of
the record is not well founded.
It would now be necessary to refer briefly to
the decisions of industrial courts to which our attention has been drawn by the
learned counsel for the appellants. In Model Mills, etc. Textile Mills Nagpur
v. Rashtriya Mill Mazdoor Sangh (1), the implications of the Full Bench formula
for ascertainment of bonus have been explained. It is observed that " the
formula did not purport to direct what a concern should do or should not do
with its own moneys. In evolving the formula the rights and liabilities of the
parties inter se in notional satisfaction of their legitimate claims as two
co-operating units in the venture were tried to be equated. Opinions might
differ as to the weightage to be attached to the various components
constituting the formula.
But the formula has to be taken as a whole in
order that an equitable balance between the rights of capital and labour might
be achieved for the ascertainment of bonus." It may incidentally be
pointed out that this decision recognizes that income-tax calculated on the
trading (I) (1955) I L. L. J. 534.
113 892 profits for the year must be deducted
as a prior charge from the profits even though exemption under the Income-tax
Act is granted for the year in question taking into consideration the past
year's losses. The same view has been expressed by the appellate tribunal in
Mahalaxmi Wollen Mills Ltd. v. 'Their Work-Workmen (1) In this case, it has
been held that "even if a concern is allowed exemption from the levy of
income tax because of prior losses or unabsorbed depreciation, etc., that by
itself is no ground for preventing the concern from claiming the amount of
income- tax it would have been liable to pay if the profits made in the
relevant year alone had been taken into account. Hence, in calculating the
amount of available surplus, the amount of income-tax payable for that trading
year is to be deducted irrespective of the fact whether the company in fact
pays tax for the year or not ". Similarly in Bennett Coleman and Company,
Ltd. v. Their Workmen(2) the Labour Appellate Tribunal has held that "
unabsorbed depreciation and loss incurred during prior years are allowed under
s. 24 (2) of the Income-tax Act to be adjusted against the profits of a future
year. Where the company claim,-, either to adjust this amount against gross
profits or to deduct such amount of income-tax as would be payable on the profits
if the said two items are not to be adjusted, labour cannot be permitted to
refuse relief resting on unabsorbed loss and depreciation and at the same time
try to get benefit for itself by refusing provision for tax resting on those
very items which are permitted to be adjusted by the income-tax authorities
which will result in reduced income-tax or no tax at all." It would thus
appear from the decisions cited before us that industrial tribunals have
consistently taken the view that income-tax calculated on the trading profits
for the relevant year must be deducted as a prior charge from the gross profits
even though the employer may be entitled to claim exemption under the
Income-tax Act in view of the fact that he had suffered losses during the previous
year. Prima (1)(1956) I L. L. J. 305.
(2)(1955) 11 L. L. J. 6o.
893 facie it may be said that, if the
essential basis for deciding the workmen's claim for bonus in a given year is
the existence of the net surplus available for that year, it may not be
permissible to question the propriety for the provision for income-tax made by
the employer solely on the ground that in view of his previous year's losses he
may not be called upon to pay income-tax during the year in question. After
all, in this connection the calculations are made by reference to the financial
position of the employer during the particular year only and in these
calculations considerations relevant under the Income-tax Act in regard to the
financial losses of the employer in the previous year would not be allowed to
enter. However, in the present appeals we are not called upon to consider the
correctness of the view taken by the Appellate Tribunal in these oases and so
we need not pursue the matter any further.
Mr. Viswanatha Sastri has strongly relied on
two labour decisions reported in B. E. S. T. Workers' Union v. Bombay Suburban
Electric Supply Ltd. (1), and Greaves Cotton and Crompton Parkinson, Ltd. v.
Its Workmen (2). These two decisions no doubt support the appellants' arguments
before us but, for the reasons which we have already given, we must hold that
these decisions are not sound or correct.
The last case to which our attention has been
drawn by Mr. Viswanatha Sastri is the decision of the Labour Appellate Tribunal
in Bengal Chemical & Pharmaceutical Works, Ltd. v. Their Workmen (3). This
case decides that " in providing for income-tax the tax payable by the
concern on its income earned in the year for which bonus is claimed must be
ascertained. The amount of income-tax actually paid during the year which is
the tax of the income of the previous year should not be taken into
account." In this case, the tribunal has observed that "for the
purpose of ascertaining the income-tax which may be payable by the employer for
the year in question, the figures (1) (1957) 2L. J. II 2.
(3) (1954-53) 6 F. J. R. 590.
(2) (1956) 1 L. L. J. 486.
894 appearing on the expenditure side of the
profit and loss account of that year have to be marshalled and examined."
This case is not of much help in deciding the point with which we are
In the result, the appeals fail on the merits
and must be dismissed with -costs. There will, however, be one set of costs in
all these appeals.