# VOLTAS LIMITED v. ITS WORKMEN

- **Citation:** [1961] 3 S.C.R. 167
- **Court:** Supreme Court of India
- **Decided:** 1959-02-05
- **Case number:** Civil Appeals Nos. 153 and 154 of 1960
- **Bench:** P. B. Gajendragadkar, K. N. Wanchoo, K. C. Das GUPTA
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/voltas-limited-v-its-workmen-1950
- **Pages:** 8

## Headnote

Industrial Dispute--Bonus-Contribution to political fund, if
can be deducted from gross profit-Extraneous income-Nature ofSalesmen and apprentices, if entitled to bonus.
The question in this appeal was whether the Tribunal was
wrong in not allowing the amount paid to a political fund which
wa~ perm1ss1blc. as an ite~ of expense and for disallowing tbe
claun for deduction of certain amounts as extraneous income and
\Vhether the sal('smen and apprentices were entitled to bonus.
Ig6o
D1ce1nber 9.
168
SUPREME COURT REPORTS
[1961]
, 96o
Held, that though the law or. the rules of the company permitted the employer to pay amounts as donations to political
Voltos Limited funds, it was not a proper expense to be deducted when workinir
v..
out the available surplus in the light of the Full Bench formula.
Its Wo,kmen
Held, further, that neither the profits from transactions
Wanchoo ].
which were carried out in the normal course of business, nor the
commission earned on transactions entered directly with foreign
manufacturers, where the workmen had serviced the goods and
did other work which brought such business to the employer,
could be allowed as extraneous income.
Held, also that the salesmen who were given commission Oil
sales had already taken a share in the profits of the company Oil
a fair basis and there was no justification for granting them further bonus out of the available surplus of profits.·
That the apprentices hardly contributed to the profits of th·'
company. Thus they were not entitled to any bonus.
The Associat~d Cement Companies Ltd. v. Their Workmen,
(1959] S.C.I{. 925 and The Tata Oil Mills Co. Ltd. v. Its Workme"
and Ors., [1960] I S.C.R. r, applied.

## Text

3 S.C.R. SUPREME COURT REPORTS
J67
workers under s. 2(1), s. 79 should not be applied to
Ig6o
them as they can absent themselves whenever they Shri Biidhichalid
like. In this very case it is said that the respondents
s1mma
remained absent for a longer period than that providv.
ed in the Act and therefore they do not need any Ffrst Civil Judge
leave. This argument has in our opinion no force. Nagpur & Others
The leave provided under s. 79 arises as a matter of
n·a,,chou J.
right when a worker has put in a minimum number of
working days and he is entitled to it. The fact that
the respondents remained absent for a longer period
·than that provided in s. 79 has no bearing on their
right to leave, for if they so remained absent for such
period they lost.the wages for that period which they
would have otherwise earned. That however does
not mean that they Rhould also lose the leave earned
by them under s. 79. In the circumstances they were
entitled under s. 79 of the Factories Act to pro portionate leave during the subsequent calendar year if
they had worked during the previous calendar year
for 240 days or more in the factory. There is nothing
on the record to show that this was not so.
In the
circumstances the appeal fails and is hereby dismissed
with costs. One set of hearing costs.
Appeal dismissed.
VOLTAS LIMITED
v.
ITS WORKMEN
(P. B. GAJENDRAGADKAR, K. N. WANCHOO and
K. C. Das GUPTA, JJ.)
Industrial Dispute--Bonus-Contribution to political fund, if
can be deducted from gross profit-Extraneous income-Nature ofSalesmen and apprentices, if entitled to bonus.
The question in this appeal was whether the Tribunal was
wrong in not allowing the amount paid to a political fund which
wa~ perm1ss1blc. as an ite~ of expense and for disallowing tbe
claun for deduction of certain amounts as extraneous income and
\Vhether the sal('smen and apprentices were entitled to bonus.
Ig6o
D1ce1nber 9.
168
SUPREME COURT REPORTS
[1961]
, 96o
Held, that though the law or. the rules of the company permitted the employer to pay amounts as donations to political
Voltos Limited funds, it was not a proper expense to be deducted when workinir
v..
out the available surplus in the light of the Full Bench formula.
Its Wo,kmen
Held, further, that neither the profits from transactions
Wanchoo ].
which were carried out in the normal course of business, nor the
commission earned on transactions entered directly with foreign
manufacturers, where the workmen had serviced the goods and
did other work which brought such business to the employer,
could be allowed as extraneous income.
Held, also that the salesmen who were given commission Oil
sales had already taken a share in the profits of the company Oil
a fair basis and there was no justification for granting them further bonus out of the available surplus of profits.·
That the apprentices hardly contributed to the profits of th·'
company. Thus they were not entitled to any bonus.
The Associat~d Cement Companies Ltd. v. Their Workmen,
(1959] S.C.I{. 925 and The Tata Oil Mills Co. Ltd. v. Its Workme"
and Ors., [1960] I S.C.R. r, applied.
CIVIL APPELLATE JURISDICTION: Civil Appeals Nos.
153 and 154 of 1960.
Appeals by special leave from the Award dated
February 5, 1959, of the Industrial Tribunal, Bombay,
in Reference (LT.) No. 212 of 1958.
S. D. Vimadalal, S. N. Andley and J.B. Dadachanji,
for the appellant in C. A. No. 153/60 and Respondent
in C.A. No. 154/60.
M. C. Setalvad, Attorney-General for India and
Janardan Sharma, for the respondents in C.A. No. 153/
60 and Appellants in C.A. No. 154/60.
1960. December 9.
The Judgment of the Court
was delivered by
WANCHOO,· J.-The only question raised in these
two appeals by special leave is about the quantum of
bonus to be paid to the workmen (hereinafter called
the respondents) by Voltas Limited (hereinafter called
the appellant) for the financial year 1956-57. The
dispute between the parties was referred to the adjudi:-
cation of the industrial tribunal, Bombay. The appel.-
laht, it appears, .had already paid 4} months' basic
wages as bonus for the relevant year but the respondents claimed it at the rate of six months' basic wagf>S
subject to the minimum of Rs. 250 per employee.
3 S.C.R. SUPREME COURT REPORTS
169
The tribunal went into the figures and after making
the relevant ca.lculations came to the conclusion that
the a.vailable surplus worked out according to the
Full-Bench formula justified the .grant of bonus equal
to five months' basic salary; it therefore ordered payment of this amount excluding the amount already
pa.id.
The .appellant in its appeal claims that the
tribunal should have allowed nothing more than what
the appellant had already paid; the respondents in
their appeal on the other hand claim that they should
have been allowed six months' bonus.
The principles on which bonus has to be calculated
have already been decided by this Court in the Associated Cement Companies fttd. v. Their Workmen (1)
and the only question that arises for our consideration
is whether the tribunal in making its calculations has
acted in accordance with those principles. This leads
us to the consideration of various points raised on
behalf of the parties to show that the tribunal had
not acted in all particulars in accordance with the
decision in the Associated Cement Companies' case(').
We shall first take the points raised on behalf of
the appellant. The first point raised is that the tribunal was wrong in not allowing a ·sum of rupees one
lac paid as contribution to political fund as an item
of expense. It is urged that this is a permissible item
of expense and therefore the tribunal should not have
added it back in arriving at the gross profits. We
are of opinion that the tribunal was right in not
allowing this amount as expenditure. In effect this
payment is no differl'nt from any amount given in
charity by an employer, and though such payment
may be justified in the sense that it may not be
against the Articles of Association of a company it is
nonetheless an expense which need not be incurred
for the business of the company. Besides, though in
this particular case the donation considering the circumstances of the case was not much, it is possible
that permissible donations may be out of all proportion and may thus result in reducing the available
(1) (1959] 2 S.C.R. 925.
1960
Valtas Limitt>d
v.
I Js ·Workmen
Wanchoo ].
v.
II.> JVorkmnz
lVanchoo j.
170
SUPREME COURT REPORTS
[1961]
surplus from which low paid workmen are entitled l;o
bonus. We are therefore of opinion that though the
law or the rules of the company may permit the
appellant to pay such amounts as donations to political funds, this is not a proper expense to he deducted
when working out the available surplus in the light
of the F'ull Bench formula.
The tribunal's decision
therefore on this point must be upheld.
The second contention of the appellant relates i;o
deduction of what it calls extraneous income. This
matter has been considered by this Court in The Tm~a
Oil Mills Co. Ltd. v. Its Workmen and Others(') and
what we have to see is whether in accordance with
the decision in that case, the appellant's claim for
deducting Cflrtain amounts as extraneous income is
correct. Li,arned counsel for the appellant has pressed four items in this connection. The first item
relates to a sum of Rs. 3·4 7 lacs. It is said that this
was not the income of the year and therefore shoul'd
not have been taken into account in arriving at the
gross profits.
The exact position with respect to this
item is not clear and in any case learned counsel for
the appellant appearing before the tribunal conceded
that the amount could not be deducted from the profits.
In view of that concession we are not prepared
t-0 allow the deduction of this amount as extraneous
income. The second item is a sum of Rs. 1·76 lacs iu
respect of the rebate earned on insurance by the
appellant with other companies by virtue of its holding principal agency. Obviously this is part of the
insurance business of the appellant and the work in
this connection is entirely handled by the insuranoe
department of the appellant; as such the tribunal was
right in not allowing this amount as extraneous income. The third item is a sum of Rs. 3·33 lacs being
gain on foreign exchange transactions. These transao·
tions are carried on in the normal course of busineas
of the appellant. As the tribunal has rightly pointed
out, if there had been loss on these transactions it
would have certainly gone to reduce the gross profits;
if there is a profit it has to be taken into account as
(1) [1g6o] 1 S.C.R. x.
3 S.C.R. SUPREME COURT REPORTS
171
it has arisen out of the normal business of the appellant. The tribunal was therefore right in not allowing this amount as extraneous income.
The last item
is a sum of Rs. 9·78 lacs being commission on transactions by government agencies and other organisations
with manufacturers abroad direct. It seems that the
appellant is the sole agent in India of certain foreign
manufacturers and even when transactions are made
direct with the manufacturers the appellant gets commission on such transactions. The tribunal has held
that though the transactions were made direct with
the foreign manufacturers, the respondents were
entitled to ask that the commission should be taken
into account inasmuch as the respondents serviced the
goods and did other work "°hich brought such business to the appellant. It seems that there is no direct
evidence whether these particular goods on which this
commission was earned were also serviced free by the
appellant like other goods sold by it in India. We
asked learned counsel for the parties as to what the
exact position was in the matter of free service to
such goods. The learned counsel however could not
agree as to what was the el(act position. It seems to
us that if these goods are also serviced free or for
charges but in the same way as other goods sold by
the appellant in India, the respondents are entitled to
ask that the income from commission on these goods
should be taken into account. As however there is
no definite evidence on the point we cannot lay down
that such commission must always be taken into
account.
At the same time, so far as this particular
year is concerned we have to take this amount into
account as the appellant whose duty it was to satisfY,
the tribunal that this was extraneous income has fail~
ed to place proper evidence as to servicing of these
goods.
A claim of this character must always be
proved to the satisfaction of the tribunal. In the
circumstances we see no reason to interfere with the
order of the tribunal so far as this part of its order is
concerned,
Two other points have been urged on behalf of the
Vol/as Liniiltd
v.
I ls U' orkmtn
rf' anclsoo ] .
Vollas Limited
v
lls wo,kmen
lFanehoo ].
172
SUPREME COURT REPORTS
[lOfil]
appellant with respect to the interest allowed on capital and on working capital. The tribunal has allowed
the usual six per cent on capital and four per cent on
working capital. The appellant claimed interest at a
higher rate in both cases. We agree with the trilmnal that there is no special reason why any higher
rate of return should be allowed to the appellant.
This brings us to the objections raised on behalf of
the respondents. The main objection is to a sum of
Rs. 4.4 lacs allowed by the tribunal as income. tax,
which is said to be with respect to the previous year.
It appears that there is a difference between the
accounting year of the appellant and the financial
year. In the particular year in dispute there was an
increase in the rate of tax which resulted in extra
payment which had to be paid in this year. In these
special circumstances, therefore, the tribunal allowed
this amount and we.see no reason to disagree.
'Next it is urged that the tribunal had allowed a
sum of Rs. 4.76 lacs for making provision for gratuity
as a prior charge. This is obviously incorrect, as i;his
Court has pointed out in the Associated Cement Companies' case (1) that no fresh items of prior charge can
be added to the Full-Bench formula, though at the
time of distribution of available surplus such matters,
as provision for gratuity and debenture redemption
fund, might be taken into account. This disposes of
the objections relating to the accounts.
Two other points have been urged on behalf of the
respondents. They are with respect to (1) salesmen
and (2) apprentices. The tribunal has excluded these
two categories from the award of bonus made by it.
The respondents contend that they should also have
been included. We are of opinion that the decision
of the tribunal in this behalf is correct. So far as
salesmen are. concerned, the tribunal has examined
the relevant decisions of other tribunals and has come
to the conclusion that salesmen who are given commission on sales are not treated on par with other
workmen in the matter of bonus. It has also li>een
.found that the clerical work done by salesmen is small
and incidental to their duty as such; salesmen have
(1) [1959] S.C.R. 925.
'
\
I '
I
3 S.C.R. SUPREME COURT REPORTS
173
therefore been held not to be workmen within the
meaning of the Industrial Disputes Act. The tribunal has pointed out that the commission on an average works out at about Rs. 1,000 per mensem in the
case of salesmen and therefore their total emoluments
are quite adequate. Besides, the salesmen being paid
commission on sales have already taken a share in the
profits of the appellant on a fair basis and therefore
there is no justification for granting them further
bonus out of the available surplus of profits.
As for
the apprentices, the tribunal has held that there is a
definite term of contract between them and the appellant by which they are excluded from getting bonus.
Besides, as the appellant has pointed out, the apprentices are merely learning their jobs and the appellant
has to incur expenditure on their training and they
hardly contribute to the profits of the appellant. The
view of the tribunal therefore with respect to apprentices also is correct.
We now turn to calculation of the available surplus
according to the decision in the Associated Cement
Companies' case (1 ). The gross profit found by the
tribunal will stand in view of what we have said
with respect to various items challenged by either
party. The chart of calculation will be as follows:-
in Lacs
Gross profits
Rs. 109·97
Less depreciation
Balance
Less income-tax @ 51·5 per cent.
Balance
Less dividend tax, wealth tax etc.
Balance
Less return on capital at
6 per cent.
Balance
Less return on working capital at
4 per cent.
Available surplus
(•) (1959) S.C.R. 925.
3·28
106·69
54•20
52•49
7•50
44•99
13·20
31·79
1·66
30•13
Voltas Limited
v.
I ts iv orkm~ff
J.Vanchoo ].
Voltas Limited
v.
Its Workmen
Wanchoo ].
December 1a.
174
SUPREME COURT REPORTS
[1961)
Out of this, the tribunal has allowed five months'
basic wages as bonus to the respondents which works
out at Rs. 16.80 la.cs. In the circumstances it cannot be
said that the award of the tribunal is not justified. We
do not think that we would be justified in giving anything more than what the tribunal has a.warded,
because the appellant has to provide for a fund for
gratuity, for it is a new concern which took over the
old employees of another concern when it was started
and has thus a greater liability towards gratuity than
otherwise would be the case. We are therefore of
opinion that the tribunal's award of five months'
basic wages as bonus for the year in dispute should
stand. We therefore dismiss both the appeals. In the
circumstances we pass no order as to costs:
Appeals dismissed.
SETH JAMNADAS DAGA AND OTHERS
v.
COMMISSIONER OF TNCOME-TAX, SOUTH
'BOMBAY
(J. L. KAPUR, M. HIDAYATULLAH and
J. c. SHAH, JJ.)
Income-tax-Two firms registered and another unregisteredfocome from unregistered firm, if can be set off against loss from
registered firms-Losses of the registered firm, if can be carried
forward in subsequent year-Indian Income-tax Act, 19zz (II of
19aa), ss. 14(a), 16(r)(a) and 24(r).
The appellants were partners of two registered firms and
another firm which was unregistered. Their profit and loss for the
assessment year I948-49 were as follows:-From registered firms
Rs. n,902 loss, I,265 loss, total loss Rs. x3,167. Income from
the unregistered firm Rs. 26,no profit, other income Rs. 262.
The income of the unregistered firm was taxed on the firm. In
assessing the amount of Rs. 262 the Income-tax Officer first
determined the total income of each of the appellants by setting
off their share of the profits of the unregistered firm against their
share of the loss of the registered firm. The appeal to the
Appellate Assistant Commissioner being unsuccessful appeals
;-
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