# Patna Electric Supply Co. Ltd v. Ball Ral

- **Citation:** [1958] 1 S.C.R. 878
- **Court:** Supreme Court of India
- **Decided:** 1958
- **Case number:** Civil Appeal No. 217 of 1956
- **Bench:** Bhagwati, J.U"Er Imam, Gajendragadkar
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/patna-electric-supply-co-ltd-v-ball-ral-1440
- **Pages:** 17

## Headnote

Industrial Dispute-Bonus-Available aurplus-Determination of-DepTeciation allowable under Income-taz Act,
if can be deducted as prioT cha,-ge-Pa.Tt of depreciation
claimed disallowed-PTovision foT
highe,-
amount. of
income-tax, if ca.n be allowed-Appellate Tribunal's poweT
of Teview.
The worlanen demanded bonus for the year 1950-51 on
the allegation that the employers had made profits during
the relevant year. The employers resisted the demand on
S.C.R.
SUPREME COURT REPORTS
879
the ground that there was a trading loss in the year and as
1957
such no bonus was payable. To determine the available
Tll s
surplus out of which bonus was to be paid, the employers MeenJsn~Wlts
deduct&d out of their gross profits an amount for depreciaLtd.
•
tion admissible under the Income-tax Act. The industrial
v.
tribunal disallowed a portion of the depreciation and found Their Workmen
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 incometax 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 diprecia.
· tion including multiple shift depreciation should rank as
prior charges.
U.P. Electric Supply Co. Ltd. v. Their Workmen, [1955}
L.AC. 659, approved.
The Labour Appellate Tribunal had the power to review
its own orders.
M/s. Martin Buru Ltd. v. R. N. Benerjee, [1958] S.C.R.
514, followed.
The method adopted by the industrial tribunals in determining the trading profits of the employers 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 lncome-tax Act.
In determining the· available surplus for payment of bonus
provision for a higher amount of income-tax 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
SUPREME COURT REPORTS
[1958]
1957
December 7, 1953, of the Labour Appellate Tribunal
The sree
of India, Madras, in Misc. Case No. III-C-387 of 1953.
M eenakshi Mt/ls,
Ltd.
A. V. Vishwanatha Sastri and S. Subramanian for
the appellants.
••
Their Workmen
M. S. K. Sastri, for the respondents.
1957. November 5.
The following Judgment of
the Court was delivered by
.
Gojendrogadkar J.
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 uni

## Text

1957
Patna Electric
Supply Co. Ltd.
v.
Ball Ral
Bhagwotl J.
1957
NortllllMi, S
878
SUPREME. COURT REPORTS
[19581
Appellate Tribunal nor was either of them mentioned
in the statement of case filed by the respondents in
this Court. Th<i!y were taken for the first time in the
arguments advanced before us by Shri P. K. Chatterjee. We have, however, dealt with the same because
we thought that we should not deprive the respondents of the benefit of any argument which could
possibly be advanced in their favour.
We are, therefore, of opinion that no appeal lay
from thE:. decision of the Industrial Tribunal to the
Labour Appellate Tribunal, that the Labour Appellate Tribunal had no jurisdiction to interfere with the
order made by the Industrial Tribunal granting the
appellant permission to discharge the respondents
under s. 33 of the Act and that the decision of the
Labour Appellate Tribunal is liable, to be set aside.
We accordingly allow the appeal, set aside the
decision of the Labour Appellate Tribunal and restore
the order made by the Industrial Tribunal, Bihar, on
date May 14, 1953. The appellant will be entitled to
its costs of this appeal from the respondents.
Appeal allowed.
THE SREE MEENAKSHI MILLS, LTD.
ti.
TREIB WORKMEN
(and connected appeals)
(BHAGWATI, J.U"ER IMAM and GAJENDRAGADKAR JJ.)
Industrial Dispute-Bonus-Available aurplus-Determination of-DepTeciation allowable under Income-taz Act,
if can be deducted as prioT cha,-ge-Pa.Tt of depreciation
claimed disallowed-PTovision foT
highe,-
amount. of
income-tax, if ca.n be allowed-Appellate Tribunal's poweT
of Teview.
The worlanen demanded bonus for the year 1950-51 on
the allegation that the employers had made profits during
the relevant year. The employers resisted the demand on
S.C.R.
SUPREME COURT REPORTS
879
the ground that there was a trading loss in the year and as
1957
such no bonus was payable. To determine the available
Tll s
surplus out of which bonus was to be paid, the employers MeenJsn~Wlts
deduct&d out of their gross profits an amount for depreciaLtd.
•
tion admissible under the Income-tax Act. The industrial
v.
tribunal disallowed a portion of the depreciation and found Their Workmen
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 incometax 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 diprecia.
· tion including multiple shift depreciation should rank as
prior charges.
U.P. Electric Supply Co. Ltd. v. Their Workmen, [1955}
L.AC. 659, approved.
The Labour Appellate Tribunal had the power to review
its own orders.
M/s. Martin Buru Ltd. v. R. N. Benerjee, [1958] S.C.R.
514, followed.
The method adopted by the industrial tribunals in determining the trading profits of the employers 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 lncome-tax Act.
In determining the· available surplus for payment of bonus
provision for a higher amount of income-tax 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
SUPREME COURT REPORTS
[1958]
1957
December 7, 1953, of the Labour Appellate Tribunal
The sree
of India, Madras, in Misc. Case No. III-C-387 of 1953.
M eenakshi Mt/ls,
Ltd.
A. V. Vishwanatha Sastri and S. Subramanian for
the appellants.
••
Their Workmen
M. S. K. Sastri, for the respondents.
1957. November 5.
The following Judgment of
the Court was delivered by
.
Gojendrogadkar J.
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 appellantg 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
S.C.R.
SUPREME COURT REPORTS
881
appellate tribunal confirmed the finding of the tribu1957
nal that the two mills formed part of the same unit.
The Sree
According to the appellate tribunal, the net surplus Meenaz~ Mills,
available for
distribution
as
bonus
came
to
v.
Rs. 2,57 ,496. The claim made by the appellants in Their ~kmcn
respect of various deductions was examined by the Gajendragadkar J.
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 parlicular 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
held that it had no power of review and that, even if
it had 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 when 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 Appeal No. 217 of 1956.
L2SC-61.Pt.VI-9
882
SUPREME COURT REPORTS
[1958]
1957
In Appeals Nos. 218 and 219 of 1956, the main
The sree
point which has been urged before us on behalf of the
Munakshl Mills, appellants is that the appellate tribunal erred in law
. L~~·
.
in disallowing the appellants' claim in respect, of
Their Workmen depreciation debited by the appellants to the extent of
Gaje11dragadkar J. Rs. 4;43,927. In the appeal preferred against the
order· passed by the appellate tribunal refus~g 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 rele"
vant year as summed up in the judgment of the
appellate tribunal :
"Net Profit as per Ex. M. l :
Add the sum wrongly debited
as cost of repairs etc.
(Rs. 2,57,793 minus
Rs. 1,00,000)
Add bonus for the year 1949-50
wrongly debited to 1950-51.
Add bonus paid to clerical staff
for 1950-51.
Add depreciation debited by the
company:
Add provision for taxation :
Add donation to a College :
Rs. 2,40,302
Rs.
1,57, 793
Rs. 1,49,920
Rs.
Rs.
Rs.
Rs.
37,896
8,43,927
1,75,000
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 made :
Depreciation allowed :
. . Rs. 4,00,000
Bonus for the year 1950-51 paid
to clerical staff :
Provision for taxation :
Rs.
37,896
Rs. 1,75,000
S.C.R.
SUPREME COURT REPORTS
883
1957
Return on capital (preference and
ordinary shares) :
Return on the reserve used as
working capital at 4 per cent. :
Rs. 2,94.500
The Sree
Meenakshi Mills,
Rs. 2,23,946
1;~·
Provision fot rehabilitation
Their Workmen
Rs. 2,56,000 Gajendragadkar J,
(Rs. 6,56,000 minus Rs. 4,00,000) : ..
Total
.. Rs. 13,87,342
Thus the net surplus available for distribution .as
··bonus comes to Rs. 16,44,838 minus Rs. 13,87,342Rs. 2,57,496."
Since in the present appeals we are concerned only
with the amount of depreciation debited by the
appellants, it \Vould be useful to set out the depreciation analysis as explained by the representative of the
appellants in the Court of the fo.dustrial 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) Usilampatti. 2,23,206 Including
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
clai.IIt for bontis against their empldyers is now well
settled. Boillts is _not, as its etymological meaning
wou:Jd suggest, a mere matter of bounty gratuitously
made by the employer to his employees; nor is it a
me.tfar 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' i~ 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 ff there is
(1) [1955] I S.C.R. 991.
112
L2SCPVI/61-!0
884
SUPREME COURT REPORTS
(19581
1957
surplus available for that purpose. Even so, the claim
TheSree
for bonus cannot be effectively made unless two conMeenakshi Mills, ditions are satisfied· the wages paid to workmen f~ 1 1
Ltd.
'
~
. v.
short of what can be properly described as living
Their Workmen wages; and the industry must be shown to have made
Ga/.ndragadkar J. profits which are partly the result of the contribu-
. tion made by the workmen in increasing production.
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('). 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 incometax. 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
Bench Formula.
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 deal-
. ing with this question there is no justification for not
giving effect to the relevant provisions of the Income-
. tax Act m respect of depreciation. Section 10 of the
Income-tax Act provides for three kinds of allowances
in respect of depreciation. Section lO(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 ~uivalent 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
(1) (1950) • L. J,. J. ,.47.
•
S.C.R.
SUPREME COURT REPORTS
885
in any case or class of cases be prescribed. This
1957
allowance is in respect of what is described as normal
The s~ee
_
depreciation. Section lO(vi) further provides for Me•4_~ Mills,
what is described as initial depreciation in cases where
'"
the buildings have been newly erected or the machiTheir Workmew
nery or plant being new, (not being· machinery or Gajeiidragadkar J.
plant entitled to the development rebate under cl.
( 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 els. (a), (b) and (c)
of s. lO(vi). Thens. lO(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 lO(virb)
also provides for all9wance "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 : Provided 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; iii
determining the question. as to whether net surplus is
available for distribution by way of bonus or not, is
obligatory on the industrial tribunals to allow the
whole of the depreciation admisi,dble 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 was allowed. Thereupon an
886
SUPREME COURT REPORTS
(1958)
1957
application was made oil behalf of the workmen on
The s~u . February 28, 1952, for particulars re la ting to the
M•~
Mills, amount of Rs. 8,44~000 <;laimed by the appellants_ by
Th • •·
way of depreciation. The. appellants promised to
e1r Workmen
·
-
· ·
·
·
_
supply the inform~tion on March 8, 1952; but ultitJa}tndragatlkar J. mately, 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 comtnented 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 n:iay have been ji1stified in commenting
on ihe defa'.U'.lt of the appellants to silpj>ly the particlila'ts, that itself woilld not justify a drastic reduction
in the amount of depteCiation claimed by the appel-
. Ia:rits. He argues that the balance-sheet 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 uncier the claim of depreciation. It is fairly conc~ded by hiin that if the triblinals
b~low were not boun~ to grant.Claims for depreciation
on what is described as initial and additional depreciations, then .he could not challenge the proprlety or
correctness of the decision of the tribunals in disallowing the items . appearing . in tl:ie depreciation
acc:ount 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. E_!ectric
Supply Co. Ltli. v. Their Workinen('). It is true that
the qttestion of bonus had to be considered in this case
in the light of the provisions of the U.P. Electricity
(Supply) Act, 1!148. Nevertheless the Full Bench
has dealt with this matter on general considerations
and has set at rest the divergence of views expressed
by differ~nt Benches of the tribunal on this point.
According to this decision, the initial depreciation
and additional depreciation are in a sense abnormal
(1) [1955] I .. A. C. 659.
S.C.R.
SUPREME COURT REPORTS
887
additions to the income-tax depreciation and they are
1957
designed to meet particular contingencies and for a
r~ sree
limited period. It would, therefore, not be fair to the Meenakshi Mills,
workmen that these two depreciations are rated as
~!~·
prior charges before the available surplus is ascerTheir !!!:.kmen
tained. It is likely tha.t, in many cases, if these. two Gafe11dragadkar J.
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 forrnula as to the
payment of bonus. If it cannot be disputed that in
industrial adjudication it is not obligatory fo 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 lncome-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
(I) [1955] L.A.C; 659.
888
SUPRE?vlE COURT REPORTS
(1958]
19S1
appellants in Appeals Nos. 218 and 219 of 1956 cann. Srti!
not succeed.
M4'/'1. MHh,
That takes us to the two other points r:iirnd by the
Ther W. rk
n appellants in Appeal No, 217 of 1956. 'The first point
'-
0
"" which has been raised in this appeal by the appellants
GaJ•n<lragadkar J. is about the jurisdiction of the appellate tribunal to
review its own orders in appropriate
ca~s under
0. 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 Mis. Martin Burn Ltd. v. R. N. Banerjee (Civil
Appeal No. 92 of 1957). Section 9(1) ands. 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 0.
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 0. 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 0. 47 .would apply to these proceedings as
much as s. 151 of the Code or the provisions of 0. 41.
We must accordingly hold that the appellate tribunal
erred in law in coming to the conclusion that it had
no jurisdiction to review its own order under the
provisions of 0. 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 i;hown 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 botli 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
S.C.R.
SUPREME COURT REPORTS
889
fact that, when the appeal was pending before the
1957
appellate tribunal, a statement had been filed by the
TheJ''i.tlh
appellants showing that the provision for income- Mee4,~ 1 •
tax had .to be r~vise~ in view of the. findings ~ecorded Their w!knt0
by the industrial tribunal. According to this state-
-.. -
·
ment, no surplus was available for payment of bonus Gajew!f~(IT 1•
to workmen even on the assumption that the findings
recorded by the tribunal were correct. The appellants pointed out in this statepient 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 appellrs 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
tQ reject it on the ground that this argument had not
been urged at the proper siage.
.
On the merits,"the argument is that, if out of the
total amount of RS. 8,43,927 debited -by the appellant$
890
SUPREME COURT REPORTS
l1958l
1957
to depreciation, an amount of Rs. 4,43,927 is disThe sree
allowed, that must inevitably add to the total amount
Meenoks/U Mills, of gross profits and if the total amount of gross profits
Ltd.
. •·
is increased, logically provision for a higher amount
Thllr ~kmen of income-tax must be made, Thus presented the
Gajendragodkor J. 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 appellant's 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 triburlal and have thus
added to the total of gross profits as determined by
S.C.R.
SUPREME COURT REPORTS
891
the tribunal. The adequacy or otherwise of the pro-
~
vision for income-tax must necessarily be judged in
The sree .
the light of the Income-tax Act since it is under the Meenakshl Mills,
Ltd.
.
said Act that the liability to pay tax would ultimately
. ";
be determined. Besides, if the appellants' argument Their Workmen
is accepted and an amount notionally payable by way GaJendragadkar J.
of income-tax in respect of disallowed items of depreciation is added to the estimated amount of incometax 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 wellfounded.
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 Mills Mazdoor Sangh(1 ), the implications
of the Full Bench formula for ascel,'tainment 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 ~n 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 deci·
sion recognizes that income-tax calculated on the
trading profits for the year must be deducted as a
(I) (1955) I. L. L. J, 534,
113
892
SUPREME COURT REPORTS
[1958]
1957
prior charge from the profits even though exemption
;::z.runder the Income-tax Act is granted for the year in
M~ Lri. MIU•, question taking into consideration the past year's
Their JJorkm•• losses. The .same view has been expressed by the
· -· · appellate tribunal in Mahalaxmi Woollen Mills Ltd. v.
Gai•ndF46a4k,,,-J. Their Workmen('). 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., tl!at 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('), the Labour
Appellate Tribunal has held that "unabsorbed depreciation and loss iJ;i.curred 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 claims either to adjust this amount
against gross profits or to deduct such amount of
income-tax as would be payable on the profits lf 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 industl'ial tribunals have cxinsistently taken the view that
in<;ome.tax calculated on th~ 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 i;uffered loi;ses
during the previous year. Prima facie it may be said
(I) (1956) I L. L.1. 305.
(2) (1955) II L, L. 1 60.
..
S.C.R.
StJi>REME COUR.'.r 'REPORTS
S93
facie it may be said ·that, if the essential basis for
z957
deciding the workmen's claim for bonus in a given
The Sree
year is tho existence of the net surplus available for Meenakshi Mills,
that year, it may not be permissiole . to question the
Ltd.
propriety for the provision for income.tax made by
v.
the employer solely on the ground that in view of his
Thefr Workmen
previous year's losses he may not be called upon to pay G . d ~k J
-income-tax during the year in question.
After a;en rag
ar ·.
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_ calcula- .
tions 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 cases 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. TV orkers' Union
v. Bombay Suburban Electric Supply Ltd.(•), and Greaves
Cotton and Crompton Parkinson, Ltd. v. Its TV orkmen (').
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 :r.Ir. 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) 2 L. L. J. II2.
(2) (1956) IL. L. J. 486.
•
(J) (1954-55) 6 F. J. R. 590.
894
SUPREME COURT REPORTS
[1958]
1957
figures appearing on the expenditure.side of the profit
The sree
and loss account of that year have to be marshalled
Meenakshi Mills, and examined." This case is not of much help in decidL~~-
ing the point with which we are concerned.
Their Workmen
G . ·'··
dk
J
In the result, the appeals fail on the merits and
a1e1~aga ar .
b d'
.
d
. h
Th
'!] h
mus~ e 1sm1sse
wit costs.
ere w1 , owever,
be one set of costs in all these appeals.
Appeals Dismissed.