Court sets aside Industrial Tribunal award, remands for reconsideration. Bank's contentions upheld, reassessment ordered.

The court set aside the Industrial Tribunal's award and remanded the case for reconsideration. The court upheld the Bank's contentions regarding the carry forward of allocable surplus for the accounting year 1964 and the deduction under clause (iv) of the proviso to Item 2 of the Third Schedule. However, the court directed the Industrial Tribunal to reassess the deduction of depreciation and the calculation of proportionate administrative expenses allocable to Indian business. The court also instructed the inclusion of bonus paid to employees in respect of previous accounting years. Each party was ordered to bear its own costs, and the appeal was partially allowed.

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Issues Involved:
1. Validity of the claim for carry forward and set on of allocable surplus for the accounting year 1964.
2. Dispute over items in the computation of 'available surplus' for the accounting year 1966.
3. Deduction of depreciation admissible under section 32(1) of the Income-Tax Act.
4. Addition of bonus paid to employees in respect of previous accounting years.
5. Deduction under clause (iv) of the proviso to Item 2 of the Third Schedule.
6. Determination of proportionate administrative expenses of Head office allocable to Indian business.
7. Interpretation of the term 'working funds' in clauses (ii) and (iii) of the proviso to Item 2 of the Third Schedule.

Detailed Analysis:

1. Validity of the Claim for Carry Forward and Set On of Allocable Surplus for the Accounting Year 1964:
The workmen claimed that there was an excess of allocable surplus over the maximum bonus for the years 1964 and 1965, which should be carried forward to 1966 under section 15(1) of the Payment of Bonus Act. The Bank contended that since the bonus for 1964 was settled on an ad hoc basis, it was not possible to determine if there was an excess allocable surplus. The court upheld the Bank's contention, stating that section 15(1) applies only when the bonus is computed according to the statutory formula, which was not done for 1964. Hence, no amount could be carried forward and set on for 1964.

2. Dispute Over Items in the Computation of 'Available Surplus' for the Accounting Year 1966:
The court examined the provisions of the Payment of Bonus Act, particularly sections 2, 4, 6, and 15, to determine the items that should be included or excluded in the computation of available surplus. The court noted that the bonus for 1966 was not settled, and thus, the statutory formula for computation had to be applied.

3. Deduction of Depreciation Admissible Under Section 32(1) of the Income-Tax Act:
The Bank claimed a higher depreciation amount than what was shown in its profit and loss account. The Industrial Tribunal accepted the Bank's claim based on a certificate from the Income-Tax Officer. The court, however, emphasized that the burden of proof was on the Bank to show the correct amount of depreciation admissible under section 32(1) of the Income-Tax Act. The court found that the certificate from the Income-Tax Officer was not sufficient evidence and directed the Industrial Tribunal to reassess the depreciation amount based on proper evidence.

4. Addition of Bonus Paid to Employees in Respect of Previous Accounting Years:
The workmen and the Bank agreed that the bonus paid in 1965 amounting to Rs. 13.27 lakhs should be added back under item 3(a) of the First Schedule. However, the Industrial Tribunal erroneously refused to add this amount back. The court directed that this amount should be added back when the case is reconsidered.

5. Deduction Under Clause (iv) of the Proviso to Item 2 of the Third Schedule:
The Bank claimed a deduction of Rs. 13.48 lakhs deposited with the Reserve Bank of India under section 11(2)(b)(ii) of the Banking Regulation Act, 1949. The Industrial Tribunal accepted this claim based on a certificate from the Reserve Bank of India. The court upheld this decision, finding that the evidence supported the Bank's claim.

6. Determination of Proportionate Administrative Expenses of Head Office Allocable to Indian Business:
The Industrial Tribunal calculated the proportionate administrative expenses allocable to Indian business at Rs. 23.88 lakhs, which was challenged by both parties. The court found errors in the Tribunal's calculations, particularly in the computation of Indian gross profit and total world gross profit. The court directed the Industrial Tribunal to reassess these figures by correctly applying the provisions of the First Schedule.

7. Interpretation of the Term 'Working Funds' in Clauses (ii) and (iii) of the Proviso to Item 2 of the Third Schedule:
The Industrial Tribunal interpreted 'working funds' to mean paid-up capital, reserves, and deposits, excluding borrowings from other banks, bills payable, and profit and loss account balances. The Bank's contention that these should be included was rejected. The court upheld the Tribunal's interpretation, noting that 'working funds' have a specific meaning in the context of banking, as established in previous awards and practices.

Conclusion:
The court set aside the award of the Industrial Tribunal and remanded the case for reconsideration in light of the decisions and observations made. Each party was directed to bear its own costs. The appeal was allowed in part.

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