Bonus computation under the Payment of Bonus Act depends on statutory formulas, admissible deductions, and correct schedule-based adjustments.

Under the Payment of Bonus Act, carry forward and set on could not arise from an ad hoc bonus settlement unless the statutory computation was actually applied or the settlement provided otherwise. Depreciation for gross profit computation had to be the amount admissible under the Income-tax Act, and the employer bore the burden of proof, though the certificate issue did not disturb the Tribunal's allowance because it was admitted without objection. Bonus paid for a previous accounting year had to be added back, the RBI deposit deduction was upheld on the evidence accepted, and the settled meaning of "working funds" excluded borrowings and similar items. Head office expense allocation required recomputation on the correct statutory basis.

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Issues: (i) Whether bonus settled on an ad hoc basis for an earlier accounting year could be treated as giving rise to carry forward and set on under the statutory bonus scheme; (ii) whether depreciation deductible in computing gross profits had to be proved by the employer and whether a certificate of the income-tax authority was sufficient; (iii) whether bonus paid for the previous accounting year had to be added back in computing gross profits; (iv) whether the amount deposited with the Reserve Bank of India was deductible under the relevant Third Schedule provision; (v) the meaning of "working funds" in the Third Schedule; and (vi) the correct computation of proportionate head office administrative expenses allocable to Indian business.

Issue (i): Whether bonus settled on an ad hoc basis for an earlier accounting year could be treated as giving rise to carry forward and set on under the statutory bonus scheme.

Analysis: The statutory provision for carry forward and set on operates only where bonus is computed under the Act and the allocable surplus exceeds the maximum bonus payable. Where the parties have settled bonus for a year on an ad hoc basis without applying the statutory formula, the exact bonus payable under the Act is not ascertainable and the statutory mechanism for carry forward cannot be invoked unless the settlement itself so provides.

Conclusion: The claim to carry forward and set on for the earlier accounting year was rejected.

Issue (ii): Whether depreciation deductible in computing gross profits had to be proved by the employer and whether a certificate of the income-tax authority was sufficient.

Analysis: The deduction allowed by the bonus legislation is the depreciation admissible under the Income-tax Act, not the amount merely reflected in the profit and loss account. The employer had the burden to prove the admissible amount by proper evidence. A certificate issued by the income-tax authority was not, in law, conclusive or independently admissible for binding the workmen, though in the circumstances of the case it had been admitted without objection. The industrial adjudicator was nevertheless expected to determine the figure itself on proper materials.

Conclusion: The deduction claimed by the employer was not accepted as a matter of principle, but the Tribunal's allowance of the amount was not disturbed because the certificate had been received without objection.

Issue (iii): Whether bonus paid for the previous accounting year had to be added back in computing gross profits.

Analysis: The First Schedule specifically requires bonus paid in respect of previous accounting years to be added back while computing gross profits. The amount paid for the preceding year fell squarely within that item and could not be excluded on the ground that it would affect the current year's account.

Conclusion: The amount had to be added back, and the Tribunal's contrary view was set aside.

Issue (iv): Whether the amount deposited with the Reserve Bank of India was deductible under the relevant Third Schedule provision.

Analysis: The employer produced evidence and a certificate showing that securities had been deposited with the Reserve Bank of India in satisfaction of the statutory requirement. The workmen's reliance on the balance-sheet figure was misplaced because the statutory deposit would ordinarily be made after the accounting year. On the evidence accepted by the Tribunal, the deduction was properly claimed.

Conclusion: The deduction was upheld.

Issue (v): The meaning of "working funds" in the Third Schedule.

Analysis: The expression had acquired a settled industrial meaning in banking disputes, referring to paid-up capital, reserves, and deposits. Borrowings from other banks, bills payable, and balance of profit and loss account were not part of that settled meaning and could not be included as working funds for the statutory calculation.

Conclusion: The Tribunal's exclusion of those items from working funds was upheld.

Issue (vi): The correct computation of proportionate head office administrative expenses allocable to Indian business.

Analysis: The industrial adjudicator had erred in computing the Indian gross profit and the total world gross profit for the purpose of the proportional formula. Amounts already deducted in arriving at net profit had to be restored where the statute required them to be added back, and all relevant adjustments under the Schedule had to be considered. The matter required recomputation on the correct statutory basis.

Conclusion: The computation was set aside and remitted for fresh determination according to law.

Final Conclusion: The appeal succeeded only in part. Some deductions and interpretive rulings were affirmed, while the computation of bonus was reopened on remand for recalculation under the statutory scheme.

Ratio Decidendi: Under the Payment of Bonus Act, bonus computation must follow the statutory formula, carry forward and set on cannot arise from an ad hoc settlement without such computation, and industrial tribunals must independently determine statutory deductions on legally admissible evidence and correct schedule-based adjustments.

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