# The I ntlore Iron and Stttl Registered Swckkolders' Assn v. The State of Madhya Pradesh Uajendragadkar

- **Citation:** [1962] 2 S.C.R. 934
- **Court:** Supreme Court of India
- **Decided:** 1959-08-13
- **Case number:** Civil Appeal No. 479 of 1960
- **Bench:** K.N. Wanchoo, K.C. Das Gupta
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/the-i-ntlore-iron-and-stttl-registered-swckkolders-assn-v-the-state-of-madhya-2308
- **Pages:** 8

## Headnote

Bonus-Payable by electricity company-Depr,ciationModt nf calculation-Indian. -Ineome-ta,v Act (11 af 1922),
Rules-Scli. VII-Electricity (Supply) Act, W48 (54 of 1.948).
The respondent, which is an electricity company, con·
tested the claim of the appellant for three months' wages as
bonus on the ground that if calculation was made on the Full
Bench Formula evolved by the Labour Appellate Tribunal and
approved by this Court in the Associated Cement Companies
Ltd. v. Its
Workmen,
(l!J59) S. C.R. 925, there would
be no surplus available to pay the bonus. The question which
arose for decision was \Vhcther d.:;preciation should be calculated according to the provisions of Income-tax Act and the
. t
•
' I
'
2 S.C.R.
SUPREl'IE COURT REPORTS
935
rules framed thereunder or in accordance with the provisions
of the Seventh Schedule to the Electricity (Supply) Act, 1948.
Heid, that the Income-tax rules should be applied in
calculating depreciation under the Full Bench formula in
preforence to the provisions of the Seventh Schedule to the
Electricity (Supply) Act, 1948 even in the cases of electricity
companies.
U.P. Electric Sllpply Company Ltd. v. Their Workmen,
(1955) (2) L. L.]. 431, Shree Jleenakshi Mills Ltrl. v. The
Workmen, ( 1958) S.C.R. 878 and Tinnevelly Tuticorin Electric
Supply Co. v. Its Workmen, (1960) 3 S.C.R. 68, considered.
The Jli ll Owners Asaociation v. Rashtriya Mill Mazdoor
San7, Bombay, (1950) 2 L. L.J 1247, referred to.
CrHL APPELLATE JURISlJICTION: Civil Appeal
No. 479 of 1960.
Appeal by specid leave from the Award
dated August 13, 1959, of the Industrial Court
Bombay in Ref. (I.C.) No. 159 of 1957.
G. T. Daru, k. Udayaruthnam and S.S. Shulda,
for the appellant.
D.
Vimarlalal, J. B.
Dadacltanji, Revinder
N(irain and 0. G. _,ffathur for the respondent.
1961. July 28. The Judgment of the Court
was delivered by
WANCHOO, J.-This is an appeal by special
leave in an industrial matter. The -ippellant is
the Ahmedabad Miscellaneous Industrial Workers'
Union, and the dispute wliich went for adjudication before the Industrial Uourt Bombay was
with respect to bonus for the year ending September 1956. The appellant
claimed that three
months' wages should be awarded as bonus by
the respondent, which is the Ahmedabad Electricity Company Limited. The contention of the
respondent was that if a calculation was made in
accordance with the Full Bench Formula evolved
by the Labour Appellate Tribunal and approved
1961
The Ahmed.abad
Miscellaneous
Industrial
Workers' Uni.on
v.
The Ah1Md.abad
Electricity Ca.
Ltd.
Wanchoo J.
1901
The Ahrnedahad
J1iscellaneous
1 ndustrial ·
TV orkers' Union
v.
The Ahmedabad
Electricity Go.
Ltd.
Wanchoo J,
936
SUPREME COURT llEPORTS
(1962)
by this Court in the Associated Cement Comvcmies
Ltd. v. 11.i Worbnen ('), there wuulJ be no available surplus from which any bonus could be
awarded. The Industrial Court accepted the contention of the respondent and rejected the appellant's claim. The main dispute in the Industrial
Court centred on three points namely-
(i) whether depreciation should be calculated according to the provisions of the
Income-tax Act and the rules framed thereunder or in accordance with the provisions
contained in the Seventh Schedule to the
Electricity (Supply) Act, No. LIV of 1948;
(ii) whether any deduction should be
allowed as a prior charge towards contingencies reserve
created under the Electricity
(Supply) Act ; and
.
·
(iii) whether any deduction should be
allowed on account of income-tax.
The Industrial Court held against the appellant
on all the three points and found that there was
uo available surplus from which auy bonus could
be awarded. Hence this appeal by special leave.
It is uot in dispute between the iparties that
if depreciation is calculated in accordance with
the rules framed under the Income-tax Act,
there will be no available surplus, from which
bonus could be awarded. The main question
therefore that ,arises in this appeal is whether
depreciation should be calculat

## Text

1961
The I ntlore Iron
and Stttl
Registered Swckkolders' Assn.
v.
The State of
Madhya Pradesh
Uajendragadkar
.
J.
1961
July 28.
934
SUPREME COURT REPORTS
[1962]
assent. This provision also shows that the decla·
ration made by the Act was intended to be pros·
pective in operation and it would affect lawsmade
!j,fter the commencement of the Act, and that
clearly must mean that if a law had been passed
prior to the commencement of the Act and it
authorised the imposition of a tax on the sale or
purchase of certain commodities its validity cannot be challenged on the ground that the said commodities have been subsequently declared by the
Act to be essential for the life of the community.
The impugned notification with which we are concerned and the Act under which it has been issued
are thus outside the purview of s. 3 of the Act.
That in substance IS the finding made by the
High Court on the second contention raised before
it by the appellant. In our opinion, the conclusion
of the High Court on this point is right.
In the result the appeafa fail and are. dismissed with costs.
Appeals dismissed.
THE AHMEDABAD MISCELLANEOUS
INDUSTRIAL WORKERS' UNION
v.
THE AHMEDABAD ELEC'1'RICITY CO. LTD.
(K.N. WANCHOO and K.C. DAS GUPTA, JJ.)
Bonus-Payable by electricity company-Depr,ciationModt nf calculation-Indian. -Ineome-ta,v Act (11 af 1922),
Rules-Scli. VII-Electricity (Supply) Act, W48 (54 of 1.948).
The respondent, which is an electricity company, con·
tested the claim of the appellant for three months' wages as
bonus on the ground that if calculation was made on the Full
Bench Formula evolved by the Labour Appellate Tribunal and
approved by this Court in the Associated Cement Companies
Ltd. v. Its
Workmen,
(l!J59) S. C.R. 925, there would
be no surplus available to pay the bonus. The question which
arose for decision was \Vhcther d.:;preciation should be calculated according to the provisions of Income-tax Act and the
. t
•
' I
'
2 S.C.R.
SUPREl'IE COURT REPORTS
935
rules framed thereunder or in accordance with the provisions
of the Seventh Schedule to the Electricity (Supply) Act, 1948.
Heid, that the Income-tax rules should be applied in
calculating depreciation under the Full Bench formula in
preforence to the provisions of the Seventh Schedule to the
Electricity (Supply) Act, 1948 even in the cases of electricity
companies.
U.P. Electric Sllpply Company Ltd. v. Their Workmen,
(1955) (2) L. L.]. 431, Shree Jleenakshi Mills Ltrl. v. The
Workmen, ( 1958) S.C.R. 878 and Tinnevelly Tuticorin Electric
Supply Co. v. Its Workmen, (1960) 3 S.C.R. 68, considered.
The Jli ll Owners Asaociation v. Rashtriya Mill Mazdoor
San7, Bombay, (1950) 2 L. L.J 1247, referred to.
CrHL APPELLATE JURISlJICTION: Civil Appeal
No. 479 of 1960.
Appeal by specid leave from the Award
dated August 13, 1959, of the Industrial Court
Bombay in Ref. (I.C.) No. 159 of 1957.
G. T. Daru, k. Udayaruthnam and S.S. Shulda,
for the appellant.
D.
Vimarlalal, J. B.
Dadacltanji, Revinder
N(irain and 0. G. _,ffathur for the respondent.
1961. July 28. The Judgment of the Court
was delivered by
WANCHOO, J.-This is an appeal by special
leave in an industrial matter. The -ippellant is
the Ahmedabad Miscellaneous Industrial Workers'
Union, and the dispute wliich went for adjudication before the Industrial Uourt Bombay was
with respect to bonus for the year ending September 1956. The appellant
claimed that three
months' wages should be awarded as bonus by
the respondent, which is the Ahmedabad Electricity Company Limited. The contention of the
respondent was that if a calculation was made in
accordance with the Full Bench Formula evolved
by the Labour Appellate Tribunal and approved
1961
The Ahmed.abad
Miscellaneous
Industrial
Workers' Uni.on
v.
The Ah1Md.abad
Electricity Ca.
Ltd.
Wanchoo J.
1901
The Ahrnedahad
J1iscellaneous
1 ndustrial ·
TV orkers' Union
v.
The Ahmedabad
Electricity Go.
Ltd.
Wanchoo J,
936
SUPREME COURT llEPORTS
(1962)
by this Court in the Associated Cement Comvcmies
Ltd. v. 11.i Worbnen ('), there wuulJ be no available surplus from which any bonus could be
awarded. The Industrial Court accepted the contention of the respondent and rejected the appellant's claim. The main dispute in the Industrial
Court centred on three points namely-
(i) whether depreciation should be calculated according to the provisions of the
Income-tax Act and the rules framed thereunder or in accordance with the provisions
contained in the Seventh Schedule to the
Electricity (Supply) Act, No. LIV of 1948;
(ii) whether any deduction should be
allowed as a prior charge towards contingencies reserve
created under the Electricity
(Supply) Act ; and
.
·
(iii) whether any deduction should be
allowed on account of income-tax.
The Industrial Court held against the appellant
on all the three points and found that there was
uo available surplus from which auy bonus could
be awarded. Hence this appeal by special leave.
It is uot in dispute between the iparties that
if depreciation is calculated in accordance with
the rules framed under the Income-tax Act,
there will be no available surplus, from which
bonus could be awarded. The main question
therefore that ,arises in this appeal is whether
depreciation should be calculated according to the
Rules framed under the Income-tax Act or in
accordance with the Seventh Schedule to the
Electricity (Supply) Act. If this question is decided against the appellant. it would be unnecessary to decide the other two points on which the
parties were at variance in the Industrial Court.
(I) (1959) S.C.R. 925.
•
T
•
2 S.C.R.
SUPREME COURT R.EPORTS
!I:!'/
What <leprnciation shoulcl be allowccl in t.l1e
C'ase of electricity oompanios eamc up for Utill81·
dcration before the Appellate Tribunal iu l!IGi:i
in thCJ case of U. P. Electric ihtp/'ly C'o111pC!n!f Ltd.
v. J'heir Workmen('), and it was vrossccl hdMo it
that in tho case of electricity ~ot11pa11i0s dO]Jl'eciation should be <lcductecl in the manner spoc:ified
in the Seventh Schedule to the Electricity (Supply)
Act.
The Appellate Tribunal pointed out that
in the long rnn the resnlt of the application of
t,he two methods would .be the same ; but it preferred to give as prior charge income-tax dcpreoia-·
tion as it was in keeping with the Fn ll ]~c-Hoh
formula and was not likely to raise fresh problems.
It appears that since then, as pointed out by
the Industrial Court, various Industrial Tribunalq
have been allowing cleprcciation'aouording to the
income-tax rates and not according to the Seventh
Schedule to the Eleptricity (Supply) Act in the
case of electricity companies also.· The U.P. Electr·ic
Supply
Company's case (') came up for
consideration before this Court in 1.'he
8hree
JJfeenakshi ,lfills .J,[d. v. The1'.r Workmen (') and
was approved.
This Go1u·t
then approved the
decision of the Appellate Tribunal
disallowing
initial a,nd additional depreciation in calculating
depreciation for
purposes
of ·the Full Bench
formula but accepted th<1t depreciation according.to
income-tax rates should be dedueted. It is true
that The Meenakshi 11lill's wse (')was not dealing
with ·an electricity comp:iny and this Court did
not have· occasion to consider th" point directly ;
even· so, this Court approved the decision in
the U. P. EleGtric Supply Company's case(') wit,h
respect to depreciation and could not have been
unaware of the fact that the Appellate Tribunal
had applied the income-tax rules for purposes 0£
depreciation to electricity companies in preference
(I) (1955) 2L. L.J. 431.
(2)
(1958) S. C .. R. 87.8.
1961
The Ahmcdabad
Miscellaneous
Industrial
Workers' Union
v.
The Ahmedabad
Electricity Co.
Ltd.
Wanchoo J.
1961
The Ahmedabad
Miscellaneou"
Industrial
Workers' Union
v.
The Ahmdabad
Electricity Co.
Ltd.
Wanchoo J.
\J38
SUPREME COURT REPORTS
[ 1!!62]
to the provisions of the Seventh Schedule to the
Eleet1frity (Supply) Act.
Further in The Tinnevdly-Tuticorin Electric
Supply Co. Ltd. v. Its Workmen (1), this Court
dealt with the ease of an electricity company
direc•tlv. It had
then occasion to consider the
U. P. ·Electric S1Lpply Company's case l') again
and pointed out that that case decided two questions of law.
The first was in regard to the
applicability of the Full Bench formula to electricity companies, and the second was with respect
to
the extent of statutory depreciation to be
allowed under the Full Bench Formula. It was
pointed out that the decision on the second point
by which the income-tax rules were applied for
purposes of depreciation to electricity companies
with the exception of initial and additional depreciation was approved by this Court in the Meenakshi
Mill's case ('). It is again true that in the Tinnevelly-Tuticorin ·Electric Supply Company's case (')
the question whether
depreciation should be
allowed in accordance with the income-tax rules
or under the Seventh Schedule to the Electricity
(Supply) Act for the purposes of the Full Bench
formula was not directly raised ; but in effect the
decision in the U. P. Electric Supply Cornpany's
case (') where the Appellate Tribunal had applied
the income-tax rules of depreciation in preference
to the provisions of the Seventh Schedule to the
Electricity (Supply) Act, was approved. In the
circumstances it seems to us that it is not open to
the appellant to raise the question that the provisions of the Seventh Schedule to the Electricity
(Supply) Act should be applied for purposes of
calculating depreciation in preference to
the
income-tax Tates in working out the Full Bench
formula.
(I)
(1960) 3 S. C.R. 68.
(3)
(I 958) S.C.R. 878.
(2)
(1955) 2 L.L.J. 431.
(4)
(1960) 3 S.C.R.68.
I
J
2 S.C.R
SUPREME COURT REPORTS
939
But, assuming. that the question is still open
because it was never directly raiijed in this Court
and specifically
decided,
we a!'e of
opinion
that. the income-tax rules shoulcl
be appliecl
ip working out depreciation
under the
Fn 11
Bench formula in preference to
the
provisiou~
of the Seventh Schedule
to
tho
Electricity
(Supply) Act. It was pointed out in T·innvellyTuticori:n Electriq 8upply Go.'8 mse (1) that 1..he provisions in tl,le Electricity (Supply) Act contained in
s. 57 and the Sixth ancf Seventh Schedules to the
Act were for a special purpose, namely, to work
:out t.he charges to be recovered from consum<>rs
for the supply of electricity. It was also observed
that the provisions of the Electricity (SnJ)ply) Act
and its Schedules were meant. for operation .in
the field covered by the Act and t.hat the principles
of industrial adjudication were wholly different
and hacl to be worked out in their own way in the
industrial field. It seems to us therefore that in
working ou't available sur1ilus according to the
Full Bench' formula, the same prinoiple with respect to depreciation should be applied in tbe case
of electricitx companies as in the case of all other
industrial concerns.
As the ,Appellate Tribunal
pointed out, the result in the long run would be
the same, though there might be difference in some
vears. Besides, in the foi·muln. when it was evolved
in 1950 (see The ivlill-Owners' .Assoc·iation· 'v.-The
Rashtriya ~f!ill'Jfazdoor f::ia,n.yh Bombay.('), the' depreciation intended to be allowed was as provided in
th{: rules under the Income-tax Act.
The Appelhte Tribunal pointed this out. in t·hP [·. P. Ehc:tric
S·tipply Oompan's case (') and said the Full Bench
formula allowed depreciation according to incometa.x rates. It seems tu us therefore that in
the field of iudustriti.l relations in connection
with which the Full Bench formnla was 0voh·ed
(I) (1960) 3 S. C.R. 68.
(2) (1950) 2 L. L.J. 1247.
(3) (1955) 2 L. L. J. 431.
1961 .
Tl1e Ahmedabad
1lfiscellaneous
1 ndu·strial
lVfJrke,rs' Union
v.
1'he Ahmedabarl
I~lecti-fcify Co.,
ltd.
Jranchoo J.
.-!'
1961
The Ahmedabad
M iscel Z..neoi;s
Industrial
Workers' Union
v.
The Ahmeda~ad
Electricity Co.,
Ltd.
IVanchoo J.
940
SUPREME COURT REPORTS
[1962)
it is proper that the formula should be worked out
as it was evolved without injecting into it the provisions contained in the Seventh Schedule to the
Electricity (Supply) Act.
This will work for uniformity in all industrial concerns ; and as pointed
out in the Associated Cement Companies' case (1),
"the formula had on the whole worked fairly satisfactorily in a large number of industries all over
the country, and the claim for bonus should be
decided by tribunals on the basis of this formula
without attempting to revise it". If the provisions
of the Seventh Schedule to the Electricity (Supply)
Act which, as we have pointed out, were evolved
for a special purpose, were to be injected into this
formula, the result would be that electricity com·
panies would stand in a group by themselves when
compared with other industrial concerns, and the
uniformity that the formula had achieved in the
matter of bonus would be destroyed. The consequence then will be that in identical situations
electricity companies may have to pay bonus while
other industrial concerns to which income-tax rates
of depreciation would be applied may not have to
do so. It seems to us that this is not desirable,
particularly when we remember that electricity
companies are public utility companies.
Another reason why we think that income-tax
rates of depreciation should be applied for the
purposes of the Full Bench formula in the case of
electricity companies also is that income-tax rates
provide for a quicker building up of the depreciation fund.
This to our mind is all to the good in
the case of public utility companies like those providing electricity so that they may be in a position
to have funds at their disposal in case of unforeseen difficulties resulting in the necessity of replacing plant and machinery earlier than what is provided under the Seventh Schedule to the Electricity
(Supply) Act.
(I) (1959) S. C.R. 925.
2 S.C.R.
SUPREME COURT REPORTS
941
There is yet another reason which inclines
us to approve the view taken by the Appellate
Tribunal in the U. P. Electric Supply Company's
mse (' ).
That case sett.led the law in 1955 and has
since been followed throughout the country. We
fed th11t we should not disturb that decision, unless
there are good reasons for doing so-and none Las
bet•n shown. If anything, it appears to us th~.t
this is not the time to disturb that decision which
has now been followed throughout the country for
the last six years, for the whole question of bonus is
under refrroncc to a high-powered commission which
will go into the matter afresh and will necessarily
consider the question of the revision of the Full
Bruch form!Jla.
As this Court pointed out in the
Assoc·irJ,ted Cement Company's case (2), the problem
mised by the question of the revision of the Full
Bench formula is of such a character that it could
only he considered by a high-powered commisRion.
That is now being done and it seems to us in the
circumstances that we should not disturb the
decision arrived at by the Appellate Tribunal in the
U. P. Electric Supply Company's case (1) on this
question.
It follows therefore that the Industrial Court
was right in allowing depreciation in accordance
with the rates prescribed under the Rules framed
under the Income-tax Act. As we have already
pointed out, if that is done, there will be no available surplus in this case, from which bonus could
be awarded. In the circumstances we do not think
it necessary to decide the other two points relating
to the contingencies reserve and income-tax, which
were raised before the Industrial Court. The
appeal fails and is hereby dismissed. In the circumstances we pass no order as to costs.
(I) (1955) 2 L.LJ. 431.
(2)
(l 9j9) S.C.R. 925.
Appeal dismissed.
1961
The Ahmedabad
Miscellaneous
I nduslrial
Workers' Union
v.
The Ahm edabad
Electricity Co.,
Ltd.
Wanchoo J.