TMI Blog1972 (4) TMI 100X X X X Extracts X X X X X X X X Extracts X X X X ..... um Rods, Radio Aerials, Fuse Wires and other products.). Its paid up capital is ₹ 2,48,65,450. It employed workmen numberingover 5000. The gross effective salaries and wages of its employees for the relevant accounting year amounts to ₹ 1,05,32,880. Its accounting year is from 1st April to 31st March of the succeeding year. For the accounting year 1964-65, the Company declared and paid bonus at 20% to all employes in accordance with the provisions of the Payment of Bonus Act, 1965 (hereinafter to be referred as the Act). For the year in question 1965-66, it calculated a sum of ₹ 23,68,785 as available surplus. This amount was arrived at by the Company after calculating direct tax without deducting the provision for payment of bonus payable to its workmen. A sum of ₹ 14,21,271 being 60% of the said available surplus was declared as bonus for the year 1965-66. This amount represented 13-51% of the wage bill. The workmen were dissatisfied with this offer of bonus at 13.51% and demanded payment of bonus at the maximum rate of 20% as provided in the Act. In consequence they raised a dispute with the Company. In view of the agreement dated November 24, 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 76 being bonus at 20% of the gross effective salaries and wages was payable for the year in question and it directed the surplus amount of ₹ 1,46,252 to be set on. As the bonus at the rate of 13.51% had already been declared and paid by the Company, the Tribunal directed the payment of the balance 6.49% within the period mentioned in the Award. One aspect which has to be acted is that (in calculating the available surplus, the Tribunal before calculating the notional direct tax, deducted the bonus payable for the accounting year in question. The grievance of the Company, as placed before us by its learned counsel Mr. D. N. Mukherjee, relates to three items (1) the method of computation of notional direct tax; (2) disallowance of the deduction from gross-profits of the sum of ₹ 2.65 lakhs made as ex-gratia payment for the accounting year 1964-65 to employees drawing emoluments exceeding ₹ 750 per mensem; and (3) disallowance of the claim for re turn on provision for doubtful debts. The first contention relates to the principle to be adopted for calculating direct tax when computing the available and allocable surplus for paymen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wed by the present Tribunal. We may also state that after the first decision of this Court, referred to above, the Act was amended in 1969. The last three decisions of this Court considered the question whether the amendments effected to the Act had made any change in the principle laid down by this Court in the first decision. It was uniformly held in all the three decisions that the amendment has not effected any change in the principle laid down in the earliest decision that the tax liability under the Act is to be worked out first by working out the gross-profits and deducting therefrom bonus payable to the employees. Therefore, it follows that the Tribunal committed an error in law in corrupting, direct tax after deducting bonus. Therefore, this point will have to be held in favour of the appellant. The second item relates to the disallowance of ₹ 2.65 lakhs which represented the ex-gratia payment made by the Company to certain employees drawing, emoluments exceeding ₹ 750 per mensem for the year 1964-65. The Company claimed that this amount should be deducted from the grossprofits whereas the Unions contended that the same has to be added back to the gross-p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the letter Ext. 1, it is clear that Mr. Banerjee received not only bonus due to him under the Act, but also the extra amount of ₹ 90. Mr. Banerjee was admittedly drawing a salary of ₹ 1000 per mensem. For a person to be an employee under s. 2(13), among other things, he is a person drawing a salary or wage not exceeding ₹ 1600 per mensem. Under s. 8, it is provided that every employee is entitled to be paid in an accounting year bonus as per the Act provided he has worked in the establishment for not less than thirty working days in that year. Section 10, provides for payment of minimum bonus to every employee. Similarly s. 11 provides for payment of bonus to every employee subject to a maximum of 20% of his salary or wage. According to Mr. Mukherjee there is no prohibition in the Act from paying bonus to officers like Mr. Banerjee, upto a maximum of 20%. Therefore, when the payment as in Ext. 1, has been made to officers like Mr. Banerjee and others, such amounts have to be computed as an item of expenditure, under the Second Schedule of the Act. It is no doubt true that an officer drawing a salary not exceeding, ₹ 1600 per mensem is an employee und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m the gross-profits for purposes of computing the available and allocable surplus. The Unions no doubt have not filed any appeal. In fact in the particular circumstances of this case the could not have filed an appeal because they have been awarded the maximum 20% allowable under the Act. But, according to Mr. Khera, if the items on which he has relied on had been added back, the Award of the Tribunal can be maintained even on the basis that the principle adopted by the Tribunal in respect of direct tax is found to be erroneous by this Court. The right of parties like the respondents before us even in labour adjudication to support the decision of the Tribunal on grounds which were not accepted by the Tribunal or on other grounds which may not have been taken note of by the Tribunal, has been recognised by this Court in Management of Northern Railway Co-operative Society Ltd. v. Industrial Tribunal, Rajasthan etc.( ) In fact this decision had to deal with an appeal filed a Co-operative Society against the Award of the Tribunal setting aside the order passed by the Society removing from its service an employee. This Court permitted the Union concerned, which was respond ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anbhai Ashabhai Patel v. Dabhi Ajitkumar Fulsinji and others((1967) 2 S.C.R. 476.), though the latter decision related to an election appeal. We will now deal with the items, which, according to ( the Unions should not have been allowed to be deducted from the gross-profits. The first item relates to a sum of ₹ 18,24,047 paid by the Company to retired workmen at Jamshedpur Workshop under a Voluntary Retirement Scheme. This Scheme is Ex. G. and it was framed on August 9, 1965. The Scheme states that the Company has been suffering, from an acute shortage of imported raw materials in view of the difficulty in getting foreign exchange and as such production could not be maintained for some, considerable time. In view of these difficulties it is stated that the Company has found it necessary substantially to reduce the number of workers in the Workshop. The Scheme offered substantial benefits to workmen who choose to retire voluntarily, namely, ex-gratia payment equal to retrenchment compensation under s. 25 of the Industrial Disputes Act, and gratuity admissible to the workmen. There is evidence on the side of the Company that about 450 workmen availed themselves o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der s. 32(1) of the Income-tax Act. According to the Unions, as the sum of ₹ 65,764 has not been accepted by the Income-tax Officer, the Company can claim depreciation only in the sum of ₹ 35,44,830. The Tribunal did not accept this contention of the Unions on the ground that the amount of ₹ 65,764 has not been disallowed by the Income-tax Officer. It is now stated in an affidavit filed in this Court on March 23, 1972 by the Chief Financial Accountant of the Company that the Company has filed an appeal against the order of the Income-tax Officer refusing to allow ₹ 65,764 as extra shift allowance for the year 1965-66. In our opinion, the rejection of the Unions contention in this regard by the Tribunal is justified. It is seen that the Company has produced figures for depreciation and that has not been subjected to any serious challenge by the Unions. Hence the objection regarding extra shift allowance has also to be rejected in view of the decision of this Court, in Jabalpur Bijlighar Karamchari Panchayat v. The Jabalpur Electric Supply Co. Ltd. and another. (A.I.R. 1972 S.C.70) The third item objected to by the Unions related to the expenditure shown ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at is stated above, it is seen that the only aspect in respect of which the Award of the Tribunal requires modification is in respect of the principle to, be adopted for calculating direct tax. As we have accepted the contention of the Company in that regard, it follows that recomputation of the available and allocable surplus will have to be made after making a calculation of direct tax without deducting bonus payable for the year 1965-66. In the original calculation filed by the Company, it calculated tax only in the sum of ₹ 98,10,893. It has later on corrected this figure by adding a sum of ₹ 1,34, 921 being surtax. Therefore, the total direct tax will be ₹ 99,45,814. Here again Mr. Gupta in his affidavit dated March 23, 1972 has given the correct figures. Therefore the recomputation of the available surplus, allocable surplus and the percentage of bonus for The accounting year 1965-66 on the basis of our judgment will be as follows Rs. Rs. Gross Profit as pier Award 216,16,195 of National Tribunal Less (1) Depreciation admissible under s. 32 (1) of I.T. Act... 36,10,594 (2) Development Rebate admissible 6,76,22442,86,818 ------ ..... X X X X Extracts X X X X X X X X Extracts X X X X
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