9911796707
TMI Blog1971 (8) TMI 221X X X X Extracts X X X X X X X X Extracts X X X X ..... g to the Company a gross profit of Rs. 6,06,684/- was earned for the year ending 31st March, 1961, but the Tribunal added to it a sum of Rs. 9,949/- as representing extraneous income and consequently computed the gross profit at Rs. 6,16,633/-. The following prior charges were claimed by the Appellant and we have indicated as against each one of these in the opposite columns what the Tribunal has awarded and disallowed:- Amount claimed by the Appellant Amount allowed by the Tribunal Rs Rs. Expenses as per profit and. loss account: 1,32,156 1,32,156 Depreciation: Rs. Normal 2,02,814 Notional normal: 2,02,814 Double shift 28,413 Double shift:Nil. 2,31,227 2,31,227 Income Tax 1,09,485 1,044155 Contingency Reserve 32,900 Nil. Development Reserve 22,333 Nil. Return on share capital 48,000 48,000 Return on working capital 60,540 Nil. Rehabilitation requirement 15,66,497 Nil Total 22,03,138 4,87,385 After making the necessary allowance as aforesaid towards dedu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the year 1960-61 namely on 31-3-61 Which is a mistake because whatever may have been the assets and liabilities at the end of the year they would not be the same at the beginning of the year nor could they be applied as the working capital. The second ground is that on the evidence it cannot be established that any reserves were utilised as working capital, nor was there any necessity to do so. Before us the learned Advocate of the Appellant has urged that the Tribunal was not justified in rejecting the material placed before it, from which the several deductions claimed by it ought to have been allowed in computing the available surplus. It will be convenient to deal with each of the items separately but before doing so we wish to set out several factors and certain essential features which have to be taken into consideration in claims made by workmen for bonus. The basic assumption which has been accepted by this Court approving the first and second Full Benches of the Labour Appellate Tribunal is that the award of bonus is not by way of an ex-gratia payment but in furtherance of social justice the claim of capital and labour which contribute to the earnings of the industrial ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... exhausted the subject". This Court in Muir Mills Co. Ltd. v Suti Mill Mazdoor Union, Kanpur([1955] (1) S.C.R. 991), generally accepted as sound the view of the Full Bench, that since labour and capital both contribute to the earnings they should derive benefit, if there is a surplus after meeting the four prior or necessary charges specified in the formula. However, neither the priority as between the four prior charges and their relative acceptance nor the conditions upon which they were allowed was examined by this Court, but it was nevertheless held that bonus is neither a gratuity nor gift nor can it be regarded as deferred payment. The principles enunciated by the First Full Bench had been approved in U. P. Electricity Supply Co. Ltd. v. Their Workmen([1952].(2) L.L.J.) as being also applicable to Electricity Undertakings. It was pointed out that in determining the available surplus it is not the profits that have to be determined as required under the Electricity (Supply) Act 54 of 1948, which had to be, considered but the gross profits as computed from the balance sheet and profit and loss account to be prepared under the Companies Act, subject to scrutiny if challenged. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... calculating depreciation in preference to the income-tax rules in working ,out the Full Bench formula. Even on the assumption that the question was still open, because as Wanchoo, J., -observed "it was never directly raised in this Court and specifically decided" they were of opinion that the Incometax rules should be applied in preference to the provisions of the Seventh Schedule to the Electricity (Supply) Act. The reasons for arriving at that conclusion are given at pages 939-941. In Associated Cement Companies Ltd. v. Its Workmen(1959 S.C.R. 925), Gajendra gadker, J., (as he then was) said at page 944 with reference to Muir Mills Company case that: "neither the propriety nor the order of the priority as between the four prior charges and their relative importance nor their content was examined by this Court in that case; and though the formula has :subsequently been generally accepted by this Court in several reported decisions...... the question about -the adequacy, propriety or validity of its provisions has not been examined nor had the general problem ,as to whether the formula needs any variation, change ,,or addition been argued and considered. It is for the first tinge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e as explained and clarified in Surat Electricity"Co. Ltd. Staff Union v. 'Surat Electricity Co. Ltd., ([1957] (2) L..LJ. 648) was approved in the Ahmedabad Miscellaneous Industrial Workers Union case and in the case in Hamdard Dawakhana Wakf v. Its Work-. men & Ors. ([1962] (2) L.L.J. 772) Apart from the notional normal depreciation the depreciation allowable under Income-tax Act for multiple shift is also allowable. (4)In calculating the Income-tax for deduction as prior charge it is not the notional normal depreciation alone that has to be deducted but the statutory depreciation namely the concessions given under the Income-tax Act to the employers which would include the depreciation for multiple shifts if any, and thereafter the Income-tax will have to be calculated. (5) Return on paid up capital allowable for deduction from the gross profits is 6%. This 'is generally the formula adopted by the Full Bench for Industrial Undertakings though it has been known to have allowed a slightly higher percentage of return in risky undertakings like plantations. (6) Return on working capital. This amount is also allowed but at a lower rate. The formula as approved by this Court is tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evidence to determine this difficult question. For a fuller discussion in see: The Associated Cement Companies case at pages 966-968. The probable cost is reached by adopting a multiplier based on the rates between the cost price of the plant and machinery and the probable price which may have to be paid for its rehabilitation, replacement or modernization. The older the plant, the higher the multiplier and hence the area of conflict between the employer and employees is larger, the former allowing the asset to become older to get a higher multiplier and the latter feeling aggrieved because of it as the provision made therefor reduces the available surplus in the bonus year. After as curtaining the multiplier, a divisor has to be adopted in respect of each block in order to ascertain the annual requirement of the employer in that behalf year after year. As this provision constitutes a large amount which eats into the gross profits and reduces the surplus the Tribunals must call for all relevant material evidence from the employer and the employees should be allowed to properly test it by cross-examination. The deductions specified in items (5), (6) and (7) like those in items (3) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evasive and not reliable. Innumerable statements, letters, balancesheet, profit and loss account and other documents called for or otherwise were filed on behalf of the Appellants. It cannot be denied that the mere filing of any of the aforementioned documents does not amount to proof of them and unless these are either admitted by the Respondents. or proved they do not become evidence in the case. On this aspect it was observed in Associated Cement Companies case at page 956: "As a general rule the amount of gross profits thus ascertained is accepted without submitting the, statement of the profit and loss account to close scrutiny. If however, it appears that entries have been made deliberately and Male-fide to reduce the amount of gross profits, it would be open to the Tribunal to examine the question....... The case of the Indian Hume Pipe Co., Ltd., v. Their Workmen ([1959] (2) L.L.J. 357) however seems to have given scope for the contention that the balance-sheet could be relied upon for proving that certain amounts stated therein were available for use as working capital and that it showed that they wherein fact so used. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Vs.. Its Workmen (citation given in the report incorrect) and Anil Strach Products Ltd. v. Ahmedabad Chemical Workers Union, cases (Civil Appeal No. 684 of 1957) were referred to and discussed. It was pointed out that Anil Starch Products Ltd., again reinforced the view of this Court that proper opportunity should be given to the labour to test the correctness of the evidence given on affidavit on behalf of the management in regard -to the use of the reserves as working capital. In Petlad Turkey Red Dye Works Ltd., v. Dyes & Chemical Workers Union, Petlad & Anr. (1)., the question whether the balance-sheet can be taken as proof of claim as to a portion of the reserve that has been used as working capital was again considered. The Khandesh Spinning & & Wvg. Mills case as well as the Management of Trichinopoly Mills Ltd. v. National Cotton Textile Mills Workers Union ([1960] 2 L.L.J. (S.C.) 46) were referred to with approval. The contention that Indian Hume Pipe's case held otherwise was pointed out to be not justified for "If it had been intended to state as a matter of law that the balance-sheet itself was good evidence to prove the fact of utilisation of a portion of the reserve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nation then to allow the delinquent to exercise his right to crossexamine him was not followed, but that ,the Enquiry Officer, took upon himself to cross-examine the witnesses from the very start. It was contended that this method would violate the well recognised rules of procedure. In these circumstances it was observed at page 264: "Now it is no doubt true that the evidence of the Respondent and his witnesses was not taken in the mode prescribed in the Evidence Act; but that Act has no application to enquiries conducted by Tribunal even though they may be judicial in character. The law requires that such Tribunals should observe rules of natural justice in the conduct of the enquiry and if they do so their decision is not liable to be impeached on the ground that the procedure followed was not in accordance with that which obtains in a Court of Law". But the application of principle of natural justice does not imply that what is not evidence can be acted upon. On the other hand what it means is that no materials can be relied upon to establish a contested fact which are not spoken to by persons who are competent to speak ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chinery worked more than double shift. In support of his statement he filed Exhibit E. 16 which he stated was correct as he had verified it from the records. Exhibit E.- 16 is not a document prepared by the witness but appears to have been prepared and signed by the Resident Engineer, according to which the total number of hours which the four boilers and the four turbines had worked during 1960-61. So far as boilers are concerned all of them are said to have worked 21,327 hours the average of which for each boiler for the year was computed at 5,331 8 hours. Similarly the turbines worked 21,629 hours which works out to an average of 5412 -3 hours per turbine per year. If the year is taken as 365 days the average for the boiler and turbine works out to 14.6 and 14.8 hours while if it is taken as 300 days it works at 17.77 and 18.04 hours respectively. The Appellant contends that there is no cross-examination of witness Ghosh nor have the employees challenged this statement. Accordingly he submits that a sum of Rs. 28,413/- should be allowed. It is however admitted that no claim was made before the Incometax Officer nor has any amount been allowed in the Company's assessment for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amounting to Rs. 49,628/- could not form. part of the statutory reserve which together with the notional normal depreciation came to Rs. 2,52,4421-. It was submitted that development rebate is not one of the species of' depreciation; that it is a rebate for development which is, dehors depreciation and has nothing to do with the written down value of the asset for calculating depreciation. From the Tribunal's order it would appear that there was no dispute with respect to the provision for Income-tax or its. quantum because after deducting the amount of statutory depreciation the amount as computed at 45 % is Rs. 1,04,415/- which was the amount claimed by it as statutory reserve as per Ex. E. 13. That the deduction of statutory allowance for computing Income-tax is the true principleis borne out by the decisions of this, Court. The contention that only notional normal depreciation and not statutory, depreciation should be taken into account was raised in Bengal Kagazkal Mazdoor Union. v. Titaghur peper-Mills Co. Ltd., where Wanchoo J. (as he then was) at page: 44. negatived it but nonetheless, because the quantum of statutory depreciation was in controversy and it was not p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his as in other matters was of little assistance to the Appellant. While he stated that Rs. 10,09,000/- was the working capital of the Company during the year, in cross-examination he admitted that the consumers deposits have been used in the business as working capital. Later on he sought to explain it by an application in which he said that what he meant was that the consumers deposit had been invested in the business. The Tribunal has carefully gone through this evidence and was of the view that Ghosh has given contradictory and false statements in respect of the consumers deposits not being used as working capital. This apart as already stated, he as no personal knowledge. In any case the Tribunal has on an examination of the Cash Book and profit and loss account Ex. W. 16 and E. I held that the receipts of the concern are little more than two lacs a month which amount by itself would be sufficient to meet its day-to-day expenses. In considering a claim for return on working capital two questions must be kept in view; whether 'the reserves were available and if they were, whether they were used as working capital and if so, what is that amount. These are questions of fact and i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the age, the, requirements and the increase in the prices of replacements. The original cost ,of these blocks has been prepared by Shri Chatterji (Ex. E. 19 and Ex. 20). But he has, not been produced and an ,attempt was made to prove them through the evidence of Ghosh. The Tribunal states that a number of questions were put to the witness to ascertain as to how he calculated the original cost and his reply was that the same has been taken from the balance-sheet. The balance-sheets for ,earlier years have also not been produced to show what the original cost was. The Tribunal has examined these matters and the evidence relating thereto in great detail ,and we agree with it that the Appellant has failed to prove the original cost of the machines, plant and machinery, its age, the probable requirements for replacement, the multiplier and the divisor. In these circumstances this claim also has been properly disallowed. There is then the claim for contingency reserve and development reserve which it is not disputed has to be provided under the Electricity (Supply) Act amounting to Rs. 32,900/- and Rs. 22,333/- respectively in all Rs. 55,233/-. The Tribunal, however, has disallowed t ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
