Subsidy under bonus law means direct cash assistance only; indirect concessions and non-statutory payments are excluded from deduction.

Under item 6(g) of the Second Schedule to the Payment of Bonus Act, subsidy was construed narrowly as direct cash assistance, so customs drawback and railway freight rebate were not deductible. Amounts paid by the Joint Plant Committee and the Indian Cotton Mills Federation also failed to qualify, because they were not received from a body corporate established by law within the statutory sense. Receipts obtained in 1967, although attributable to earlier years, were treated as income of 1967 on a cash basis and could be included in allocable surplus. On that basis, only the direct Government cash subsidy remained deductible and the bonus computation required recalculation.

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Issues: (i) Whether only direct cash payments qualify as "subsidy" under item 6(g) of the Second Schedule to the Payment of Bonus Act, 1965, or whether indirect incentives such as customs drawback and railway freight rebate are also deductible; (ii) Whether the amounts paid by the Joint Plant Committee and the Indian Cotton Mills Federation are deductible as subsidies received from a "body corporate established by any law for the time being in force"; (iii) Whether amounts received in 1967 but attributable to earlier years could be taken into account in computing the allocable surplus for bonus.

Issue (i): Whether only direct cash payments qualify as "subsidy" under item 6(g) of the Second Schedule to the Payment of Bonus Act, 1965, or whether indirect incentives such as customs drawback and railway freight rebate are also deductible.

Analysis: The expression "subsidy" was held to bear a restricted meaning, confined to direct cash assistance. The dictionaries and legal references relied upon showed that subsidy denotes something granted or paid directly by the Government or a public authority. Indirect reliefs such as customs drawback and railway freight rebate were treated as concessional rates or refunds and not as subsidy in the statutory sense. The statutory setting also supported a narrow construction, because item 6(g) concerned a deductible item affecting bonus computation and should not be expanded beyond cash grants actually received as subsidy.

Conclusion: Only direct cash payments are subsidy within item 6(g); customs drawback and railway freight rebate are not deductible subsidies.

Issue (ii): Whether the amounts paid by the Joint Plant Committee and the Indian Cotton Mills Federation are deductible as subsidies received from a "body corporate established by any law for the time being in force".

Analysis: The Joint Plant Committee was held not to be a statutory body corporate established by law. It functioned under governmental arrangement, but the materials did not show it to be a body corporate created by or under a Central, Provincial or State Act. The Indian Cotton Mills Federation also did not answer the statutory description, since it was only a company registered under the Companies Act and not a body corporate established by law in the relevant sense. The distinction between a body corporate established by law and one established under law was treated as material and deliberate in the Bonus Act.

Conclusion: The payments from the Joint Plant Committee and the Indian Cotton Mills Federation were not deductible under item 6(g).

Issue (iii): Whether amounts received in 1967 but attributable to earlier years could be taken into account in computing the allocable surplus for bonus.

Analysis: The Court rejected the contention that because such sums were shown in the profit and loss account, they could not be treated separately. Section 23 only raised a presumption as to the correctness of the balance sheet and profit and loss account, not an estoppel against examining the character of the receipts. Since the accounts were maintained on a cash basis, sums received in 1967 were income of that year even if they pertained to earlier periods. Such receipts could therefore be considered in the 1967 bonus computation.

Conclusion: Amounts received in 1967, though relatable to earlier years, were income of the year 1967 and could be included in the computation.

Final Conclusion: The management appeals failed, while the workmen's appeals succeeded to the extent that only the direct cash subsidy from the Government remained deductible and the bonus computation had to be recalculated on that basis.

Ratio Decidendi: For purposes of item 6(g) of the Second Schedule to the Payment of Bonus Act, 1965, subsidy means direct cash assistance from the specified source and does not include indirect concessions or refunds; only receipts from a body corporate established by law can qualify, and cash receipts are to be treated according to the accounting basis actually adopted.

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