TaxTMI 
TaxTMI 
1972 (2) TMI 68
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....e, justified in announcing payment of one month's basic wages as advance against wages for the half-year ending June 1965 instead of declaring this payment as an ad- vance against payment of bonus as was being, done all these years ? If not, what other relief the workers are entitled to. This was numbered as Reference No. A.I.D. 6 of 1966. Civil Appeal No. 1291 of 1967 is directed against that part of the order of the Tribunal regarding this Reference. On March 5, 1966, the Government of MysorE referred to the same Tribunal for adjudication the following question "Whether the demand of the workers of Bangalore Woollen, Cotton and Silk Mills Co., Ltd., Bangalore, for additional bonus for the year 1962 and 1963 at the rate of 2 months additional bonus and4 months additional bonus on total wages respectively is justified. If not, to what other relief or reliefs are the workmen entitled ?" This Reference was numbered as A.I.D. 8 of 1966. Civil Appeal No. 1292 of 1967 is directed against that part of the order of the Tribunal regarding this Reference. Both the appeals are by the Company. We will first take up Civil Appeal No. 1291 of 1967. appellant was making two ....
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....ence being made by the State Government on December 8, 1965, No. A.I.D. 6 of 1966. The short stand taken by, the appellant before the Tribunal was that the payments were being made as bonus at the end of each half-year on the basis of the profits earned by the Company. Such payment was a voluntary act of the appellant and related to profit and it had not become a condition of service of the employees. The further case of the appellant is that as the Act had come into force, bonus is governed by the provisions of the Act and that bonus is to be paid only within eight months after the close of the year of account, i.e., December 31, 1965. The Unions pleaded that the payment of bonus at the end of each half-year, which was being done for a long number of years, has become a condition of service and the amounts paid were not related to the profits earned by the Company. The Unions further contended that the Act has not in any manner affected the right of the employees getting bonus in the manner paid by the appellant namely , at the end of every half-year. The Tribunal has recorded the following findings : The pay- ment of bonus was not a settled condition of service, but is d....
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....utation of the amount as per the Act, the direction given by the Tribunal regarding payment of half-yearly bonus is illegal and contrary to the provisions of the Act. This direction, the counsel pointed-out, given by the Tribunal, will apply not only to the year 1965, but also to all succeeding years. On the other hand, Mr. H. K. Puri, learned counsel for the respondents Nos. 2 and 3, whose contentions have been accepted by the, counsel for the other respondents, urged that the Act does not prohibit an employer from paying bonus at the end of each half-year. The appellant has been paying bonus in two installments, namely, at the end of each half- year. It is always open to the appellant, both by virtue: of the provisions of the Act and the direction given by the Tribunal to deduct when paying final bonus at the end of the accounting year, any amounts that may have been paid for the first half-year. Therefore, according to Mr. Puri, the directions given by the Tribunal are neither illegal nor contrary to the provisions of the Act. We are not inclined to accept the contention of Mr. Puri. We have already referred to the findings of the Tribunal to the effect that the amount that w....
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....xed the time limit for payment of bonus. If there is a dispute regarding payment of bonus pending before any authority, the bonus will have to be paid within a month from the date, on which the Award becomes enforceable or the settlement comes into operation. In any other case the bonus will have to be paid within a period of eight months from the close of the accounting year. Under the proviso to s. 19, power is given to the appropriate Government to extend the period of eight months in accordance with the provisions contained therein. Section 34 provides that the Act except as otherwise provided in the section, shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force or in the terms of any Award, agreement, settlement or contract of service made before May 29, 1965. We have referred to some of the relevant provisions of the Act. From a perusal of the scheme of the Act, it is clear that the bonus for a particular accounting year will have to be computed in accordance with the provisions of the Act on the basis of the gross-profits which are determined at the close of the accounting year. The Act itself provides as ....
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....f part bonus which he is entitled to take into account and adjust when making final payment at the close of the accounting year. It is one, thing to say that an employer can make voluntary payment, but it is- a different thing for the Tribunal to give a direction to that effect. Section 17 on which reliance, is placed by Mr. Puri is as follows: "Where in any accounting year-- (a) an employer has paid any paid bonus or other customary bonus to an employee; or (b) an employer has paid a part of the bonus payable under this Act to an employee before the date on which such bonus becomes payable, then, the employer shall be entitled to deduct amount of bonus so paid from the amount of bonus payable by him to the employee under this Act in respect of that accounting year and the employee shall be entitled to receive only the; balance. Clause (a)has no application as the Tribunal has categori- cally held that there is question of any payment by way of puja bonus, or other customary bonus. Even then if any such bonus has been paid the employer is entitled to deduct the same from the amount of bonus payable under the Act. Clause (b) is an enabling section in favour of the employ....
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....h has been approved by this Court in The Associated Cement Companies Ltd. Dwarka Cement Works, Dwarka v. Its Workmen and Another Both the parties have filed statements of calculations according to (1) [1959] S.C.R. 925. the said Formula. The statements Exs. M. 1 and M.2 filed by the Management represent the computation of available surplus for the years ended December 31, 1962 and 1963 respectively. Ex. M. 1 is as follows-: "THE BANGALORE WOOLLEN, COTTON & SILK MILLS CO. LTD. Statement showing the computation of available surplus for the year ended 31st December, 1962 (Under L.A. T. Formula) Profit as per profit and loss Account6801756 Add: Provision for Bonus 1614000 Depreciation on Fixed Assets 1696481 Donations 107362 Additional Bonus for 1961 146000 3563843 ---------- 10365599 .Less: Profit on sale of assets 1745426 8620173 Less Normal Depreciation and Shift Allowance1465812 7154361 Less: Tax Liability Profit as above 7154361 Less -Development Rebate 586415 6567946 Income-tax Liability at 50 Y. on Rs. 65534083276704 Income-Tax at 25....
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.... Regulations Act, the Company is bound to pay 7.8% on Preference Share Capital. Ile Workmen did not raise any controversy regarding the return on Ordinary Share Capital at 6%. The Tribunal, therefore, accepted the figures given in both Exs. M. 1 and M. 2 and to the return of Ordinary Share Capital. But the controversy arose about the claim made by the appellant regarding return on Reserves employed during the two years. It will be noted that neither in Ex. M. 1 nor in Ex. M. 2 the appellant has made any claim for rehabilitation excepting adding a note to the statement that they are subject to a claim for rehabilitation. The two points in controversy between the parties regarding these two years were (1) The claim for Return on Reserves and (2) Provision for Rehabilitation. We will first take up the question regarding the claim of the appellant for return on Reserves. In Ex. M. 1, the appellant has claimed a sum of Rs. 178733.00 as 4% return on Rs. 44468315.00 being the amount employed in business. Similarly in Ex. M.2, for the year 1963, it had claimed Rs. 1877518.00, being 4% return on Reserves on Rs. 46937947.00, employed in the business. The Unions contested the claim of t....
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....ountant,, M.W.1, has held that the amounts which should have been used as Working Capital are those mentioned in Exs. M.1(a) and M.2(a), less the fixed assets and capital works in progress. The Tribunal has further held that the working capital cannot include fixed assets nor the capital works in progress, as they represent the funds required for day to day work of the Company. According to the Tribunal these fixed assets have been accumulated over years and they cannot form part of-the working capital. However, the Tribunal accepted the claim of the appellant that the other items in Exs. M.1(a) and M.2(a), namely, investments, interest accrued on investments, stores and spare parts, raw materials, process stocks, finished stocks, sundry debtors, advances etc. are the amounts available to be used as working capital. On this reasoning the Tribunal held that in calculating the return on working capital, the amounts mentioned in Ex.M.1(a) and M.2(a) less the amount sunk in fixed assets and working capital in progress, have to be deducted. On this basis it deducted from Rs. 44468315, a sum of Rs. 43139570, and fixed a sum of Rs. 1328745, as Reserves employed in business during the year....
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....justified in deducting the amount of fixed assets and capital works in progress shown in Exs. M. 1 (a) and M.2 (a) from the total shown by the appellant in those statements. The counsel further urged that in considering the claim for return on working capital two questions have to be kept in view: (1) Whether the Reserves were available, and if they were (2) whether they were used as working capital and if so what is that amount. The Tribunal in our opinion, has correctly kept these two principles in view in arriving at the amount of Reserves used as working capital and on which a return is to be allowed. We see no error committed by the Tribunal in the calculation made for arriving at the, Reserves which must have been used as working capital, especially as the evidence on the side of the appellant was very unsatisfactory. Even the appellant has deducted the amount of share capital before arriving at the final figures mentioned in Exs. M.1(a) and M.2 (a). But the appellant was claiming the whole of the final amount shown in these two statements as Reserves used as working capital, which it was not certainly entitled to in law. We have already pointed out that the Tribunal....
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.... for rehabilitation both on the grounds that the appellant has no scheme for rehabilitation and that the rehabilitation claim can be adequately met with from the huge Reserves of nearly four crores of rupees that the appellant had. It must be noted that Rehabilitation Reserve is a substantial item which goes to reduce the available surplus and as a result affects the right of the employees to receive the bonus. Hence the employer will have to place all relevant materials and the Tribunal will have to scrutinize them carefully and to be satisfied that the claim is justified. It is no doubt true that it is but proper in the larger interest of the industry as well as the employees that proper rehabilitation Reserve should be built up taking into consideration the increase in price in plant and machinery which has to be replaced at a future date and by determination of multiplier and its deviser. It is also clear from the decisions of this Court that if a Company has no scheme for rehabilitation, then of course, its claim on that head must be rejected. [vide Azam Jahi Mills, Ltd. v. Their Workmen]. Further, since it is the employer who seeks replacement costs, it is for him to satis....
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....,is follows "We are not prepared to accept either argument because, in our opinion, the life of the machinery in every case has to be determined in the light of evidence adduced by the parties." But it is unnecessary for us to pursue this aspect further as we are disallowing the entire claim for rehabilitation. Mr. Malhotra, also criticized the view of the Tribunal that in this case the evidence of the witnesses on the side of the appellant clearly shows that the machines are working very efficiently though they have been running for over 50 years. On the other hand, the counsel urged that the principle to be borne in mind, when considering the claim far rehabilitation, is that the life of the machinery is the period during which it is estimated to work with reasonable efficiency and not the period during which it has actually been operated, that is, till it becomes too deteriorated for use. No doubt the last proposition enunciated by the counsel in the abstract is correct; but the question is whether the appellant has discharged its burden of satisfying the Tribunal that it had a scheme for rehabilitation and whether it had placed the necessary materials for the purpose of w....
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....ring the claim for rehabilitation. In fact the Mill Manager, M.W. 2 has stated that the company has floated a debenture for 1 1/2 crore for buying new machinery. This clearly shows that the appellant had no scheme for rehabilitation and that explains the reason why it had not made any provision for rehabilitation. Mr. Malhotra, then urged that at any rate the Tribunal itself has proceeded on the basis that some amount for rehabilitation is necessary to be provided for each year. Based on this observation of The Tribunal, the counsel pointed out that the appellant should be allowed at least the amount that it has actually spent for replacement of machineries in the years 1962 and 1963. According to him a sum of Rs. 2619608 and Rs. 2124102 have been spent in the years 1962 and 1963 respectively for machinery and plant installed in those years. In this connection he referred us to the balance sheet and profit and loss accounts for these two years and stressed that the Tribunal has committed an error in not allowing at least these amounts by way of provision for rehabilitation. it is no doubt true that these amounts are shown in the schedules to the balance sheets for the years conc....
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....eady paid for the years 1962 and 1963 to all employees drawing a total of Rs. 500/- and less per mensem. From that statement it is seen that for the year 1962 it had paid a sum of Rs. 1441455 and for the year 1963 a sum of Rs. 1960795. On the basis of the available surplus worked out for the years 1962 and 1963, the balance 483 available surplus after deducting bonus already paid will be as follows: 1962 Rs. Available surplus as worked out by the Tribunal2635914 Amount already paid as bonus by the appellant1441455 Balance . . . . . . . 1194459 1963 Available surplus as worked out by the Tribunal4904987 Amount already paid as bonus by the appellant1960795 Balance .. . . . . . 2944192 What the Tribunal has done is to distribute 1/3rd of the, amount shown as balance above, for each of the years as additional bonus. That results in the workmen getting Rs. 398153 representing 25 days basic wages as additional bonus for the year1962. Similarly, the workmen get Rs. 981397 representing two months basic wages as additional bonus for the year 1963. Therefore, it will be seen that the total bonus thatthe workmen will get for each of the years will be as follows 1962 Rs. 1....