SINHA, C. J.: - (1.) JUDGMENT of Sinha C. J., Subba Rao, Mudholkar and Venkatarama Aiyar JJ was delivered by
(2.) THIS appeal, by special leave, is directed against the award dated 10/05/1961, made by the central government's Additional Industrial tribunal (Shri Salim M. Merchant) Bombay, in Reference No. 4 of 1960, on a reference made by the central government under cl. (d) of sub-s. (1) of s. 10 of the Industrial Disputes Act (XIV of 1947). The main point in controversy between the parties relates to the question of bonus, both traditional or customary bonus and profitsharing bonus. The appellants are a partnership firm, registered under the Indian Partnership Act, 1932, and have their office at 46, Veer Nariman Road, Fort, Bombay 1. The firm carries on business in the name of Messrs. Tulsidas Khimji and for the relevant year end 31/10/1958, the partners were (1) Shri Karsondas Tulsidas (2) Shri Ranchhodas Goculdas(3) Shri Narandas Tulsidas (4) Shri Moolsing Karsondas (5) Shri Shantu Karsondas and (6) Shri Narendra Banchhodas. They are closely related to one another. The first two Partners aforesaid have been associated with the firm for about 40 years the third for about 35 years, the fourth for about 15 years, the 5th for about 8 years and the 6th for about 5-6 years. At all material times, the six partners had been working for and in the interest of the firm, which carried on different kinds of business, namely, (1) Clearing and Forwarding Agents, (2) Godown Keepers, (3) Insurance Agents and (4) Cotton Supervisors and Controllers. For carrying on these different kinds of business, they maintained four different and distinct departments. The respondents are workmen employed under the firm. The question referred to the tribunal was 'quantum of bonus payable to workmen for the year ended 31/10/1958'. A number of issues were raised before the tribunal., of which it is only necessary to notice the 4th and the 5th issues, which are as under: '4. Whether the claim under reference should be restricted to a claim for profit-sharing bonus or customary bonus or on basis of implied terms of contract? 5.Whether it is open to the workmen to claim bonus on the basis of surplus profits, and at the same time claim bonus on the ground of custom and practice or implied terms and conditions of service? Or whether the workmen should elect the basis on which they claim bonus? The union of the workmen had claimed profitsharing bonus at the rate of 6 months' wages (inclusive of Dearness Allowance) and traditional or customary bonus at a rate, which is not clear but which may be said to be either three months' or one month's wages, plus dearness allowance, on the occasion of the Dewali festival. The difficulty in clearly stating the case for the workmen is that they were not clear in their own minds as to whether they were claiming the customary or traditional bonus as one of the implied terms of their employment or for the special festival occasion of Dewali. It was not even clear whether the claim for 6 month's wages, inclusive of dearness allowance, was the total claim for bonus or was in addition to the traditional or customary bonus, either implied or as festival bonus on the occasion of Dewali. That accounts for the form of the issues set forth above. The appellants conceded only one month's basic wages as bonus which had already been paid, and contested the claim for traditional or customary bonus either as an implied term of contract of Service or as a festival bonus. As there was some confusion about the claim of the respondents, the tribunal, after referring to a number of documents and oral statements, came to the conclusion that the respondents had claimed by way of maximum bonus, 6 month's wages on a profit-sharing basis, and that the minimum was the claim for customary or traditional bonus of three months' basic wages and one month's dearness allowance. On Issue No. 4, the tribunal decided that those were alternative claims, and that it was not necessary for the workmen to elect any one of the alternatives. The tribunal pointed out that till the decision of this court in the case of The Graham Trading Co. (India) Ltd. v. Its Workmen (1) a clear distinction was not made in respect of claim for bonus as an implied term or condition of service and at a customary or traditional bonus, and the respective tests to determine them. The tribunal, therefore.. held that the workmen were entitled to claim bonus on each of the three alternative basis, namely, (1) Profitsharing bonus, (2) bonus as an implied term of service and (3) customary or traditional bonus on the occasion of Dewali. The tribunal pointed out that the appellants had already paid to its workmen bonus equivalent to one month's basic wages, which amounted to Rs;. 20,78.00 . In order to determine the question of the first kind of bonus, namely, profit-sharing bonus, the tribunal had to determine the available surplus. In order to do that, it had to grant certain deductions from the gross profits. The appellants claimed deductions under a number of beads, but we are concerned only with two out of them, namely, (1) whether the appellants' claim for deduction of 51 % out of the gross profits on accounts of Income-Tax was justified, and (2) what should be the amount of remuneration for the six partners, in respect of which also deduction may be granted. The tribunal decided that the amount of tax payable by the firm, as such, should be deducted and not as claimed by the appellant. On that basis, the tribunal found that the amount deductible on account of Income-Tax would come to a little over 5% of the total amount of the gross profits. As regards the remunerations of the partners, the tribunal fixed a lumpsum of twenty thousand rupees, on a basic which is not easily discernible from the award, and may be said to be more or less conjectural. After making provision for the prior charges on the amount of the residuary surplus, the tribunal came to the conclusion that a bonus equivalent to 1/4th of the total basic wages earned by the workmen during the year under reference, i.e., the year ended 31/10/1958, would be justified. It then turnedto the question of the alternative claim of the workmen to three months' basic wages, plus one month's dearness allowance, either as an implied term of conditions of service or as customary or traditional bonus. On a consideration of the decisions of this court, and other decisions of High courts and tribunals, it came to the conclusion that though the respondents may not have succeeded in establishing their claim on the basis of implied terms of contract, they had succeeded in proving their claim for traditional or customary bonus at a uniform rate of one month's basic wages plus dearness allowance. In the result, the tribunal awarded to the workmen bonus equivalent to 1/4th of the total basic wages, less the amount of bonus equivalent to one month's wages already paid for the year under reference, on the same terms and conditions as had been prescribed in the award in respect of the previous year ended 31/10/1957. Against this award, the firm has come up in appeal. There is no cross appeal by the workmen, even though, on the findings recorded by the tribunal, they were found entitled to three months' wages, by way of profit sharing bonus and one months wages plus dearness allowance by way of traditional or customary bonus on the occasion of Dewali. Substantially, three questions were raised before us on behalf of the appellants, namely, (1) that deduction for income-tax, in order to arrive at the actual figure of available surplus, should have been, not on the basis of what income-tax is actually payable or has been is in respect of the registered firm, but on a notional basis, which may be analogous to the case of a registered company, or on the basis of the Tax payable on the lumpsum income of 1.95 lakha by an unregistered firm, or on some other basis which may have some resemblance to what each one of the partner,% has to pay in respect of his income : (2) that the partners' remuneration should not have been fixed by the tribunal at Rs. 20,000.00 , by a rule of thumb, but should have been fixed on the basis of reasonable remuneration which the firm should pay to the partners for running its business in the four departments, aforesaid. In this connection, it was said that if Rs. 96,000.00 , as claimed by the appellants, was thought to be too high, a figure of Rs. 48,00.00 which is half the amount claimed, would be highly reasonable in the facts and circumstances of the business of the firm; and (3) that the Tribunal had misdirected itself in arriving at a finding that the workmen had succeeded in establishing their claim to traditional or customary bonus at a uniform rate of one month's basic wages plus dearness allowance.
(3.) WE shall take up the points in the order indicated above. It is not contested on behalf of the respondents that some deduction has to be made on account of income-tax, but their learned counsel has contended that the tax should be what the firm as such has to pay by way of income-tax. It was said in this connection that a registered firm is a legal entity for the purposes of income-tax, and that the tribunal was perfectly justified in giving credit only for the sum of about Rs. 10,000.00 , worked out on that basis. On the other hard, it was contended on behalf of the appellants that 51.5%, or whatever may be the actual rate of income-tax payable by a company should have been deducted. Alternatively, it was argued that 7 annas in a rupee would be a fair basis. In our opinion, it would not be right to equate a registered firm to a company for the purpose of deduction of income-tax. It is true that the income-tax deduction has to be made on a notional basis, laid down by a bench of 5 Judges in this court, in The Associated Cement Companies Ltd., Dwarka Cement Works, Dwarka v. Its Workmen (1). But even so, the notional basis must have relevance to the law of income-tax in respect of firms. In this connection, the following alternatives were suggested on behalf of the appellants, namely, (1) income-tax at 7 annas in a rupee which will wipe off about rupees 85 thousand or about 45% of the profits; (2) a sum of about Rs. 53,000.00 odd on the basis of income-tax payable on an income of 1.95 lakhs of the firm on the footing of the partners paying the tax at the appropriate rate on their shares of the income, this would account for about 27% of the profits, after adding the ten thousand rupees, which is a registered-firm tax, as already indicated; (3) tax of one lakh forty thousand odd on the basis of the firm being unregistered, which the income-tax authorities are entitled to do in certain circumstances this would account for about 70% of the profits; (4) income tax amounting to roughly 68 thousand rupees, plus ten thousand rupees in respect of registered-firm tax, on the basis of the tax payable by the partners on the income of the registered firm at the rate applicable to their world income, on their shares in the firm. WE have no hesitation in rejecting the first suggestion of deducting about 7 annas in the rupee because that will be on the basis of a tax on a corporation, the basis which we have already rejected as unfair. Even more unacceptable is the suggestion of knocking off a lakh and 4 thousand rupees, which has the effect of setting apart the major share of the profits for income-tax on a highly notional basis. The 4th alternative of taking into account the world income of the partners of the firm would be equally unjust and unfair to the workmen in the case of the members of the firm being very rich persons. This course would be highly objectionable from another point of view, which is a very important consideration, namely, that in order to determine the bonus payable for a particular year of working of the firm, the word income of the partners of the firm may have to be determined in the first instance, which process may take years. As the appellants themselves have rightly stated that the deduction on account of income tax has to be on a notional basis, the basis has got to be such as to be readily ascertainable, and that can only be done by making calculations on the profits of the firm itself, for the particular year. The last alternative of allowing deduction under this head of calculating income tax on the actual figures of the profits of each of the partners separately appears to be reasonable, because the figures are known and the tax of each constituent members of the firm can be easily calculated on the basis of his share. But it has been argued On behalf of the respondents that the amount of income-tax payable by the firm as such, viz., about Rs. 10,000.00 should be permissible deduction and not what each partner had to pay on his share of the profits, because it is the firm which is the employer and which can claim deduction under this head. But this contention cannot be pushed to its logical conclusion because a firm is not a legal person within the meaning of the Industrial Disputes Act. It is the partner of the firm who are the employers. It is that fact that has to be taken into account in considering the question of income-tax, even as in other matters like remuneration, etc.; i. e., the amount of tax payable by each: partner, qua the business of the firm, irrespective of their other sources of income or loss, because national is quit different from the actual, though not wholly dissociated from it. But the question still arises whether the registered-firm tax can also be added to the figure of income-tax arrived at by the process just indicated. In our opinion, it would no',-, be right to give the employers the double benefit of granting deduction on the basis of income-tax payable by each partner in respect of his share in the profits of the firm, and at the same time adding the registered-firm tax, which is paid by the firm in order to obtain certain reliefs under the Income Tax Act, which they would not otherwise have obtained. Hence, as a result of the foregoing considerations, the sum of 53 thousand rupees, in round figures, should be allowable under this head of income-tax. Even that figure, it was admitted, would represent about one quarter of the profits. The next question that falls to be determined is what amount should be allowed under the head Remuneration to the partners of the firm'. In this connection, it has been found by the tribunal that the claim of the partners that they devoted their whole time to the business of this firm only, is not correct; and that the individual partners, on their own account, and certainly as partners of another firm, have been carrying on their other business activities. It has also to be borne in mind that the partners have not been able to adduce any reliable date to determine the amount of time and energy which they devote to the business of the firm in question. It is equally true that the sum of Rs. 20,000.00 fixed by the tribunal, under this head, amounting roughly to 10% of the gross profits is more or less conjectural. We know that the sum of Rs. 4,60,000.00 represents roughly the wage bill for the year in question. Comparing the sum allowed by way of remuneration to the partners to this figure, it appears to us that the amount fixed by the tribunal errs on the said of inadequacy. But this court is not in a position to come to any definite conclusion of its own the record as it stands, assuming that it is open to this court to record a finding, which is more or less one of fact, in disagreement with the finding of the tribunal. It must be added that this court does not function as a regular court of Appeal from the tribunal. Its function is merely to see that the law is being properly administered, in accordance with well settled rules of natural justice. Hence, we would not embark upon a fruitless task of determining a figure which will not have any substratum of solid facts and figures to support our conclusion. The remaining question of traditional or customary bonus has been pressed upon us on behalf of the appellants. It has been argued that the tribunal has not followed the rulings of this court on the question of a bonus of the kind we are now dealing with. The tribunal has come to the conclusion that the workmen have proved that bonus at a uniform rate of one month's basic wages plus dearness allowance, on the occasion of Dewali, has been paid throughout the period of more than 15 years, between 1940-41 and 1956-57. That is a finding of fact. But it has been contended that according to the judgments of this court, in order to establish the claim for a bonus of this kind, four conditions must be fulfilled, namely, (1) that the payment has been made over an unbroken series of years; (2) that it has been so made for a sufficiently long period, (3) that the payment has been made at a uniform rate throughout, and (4) lastly, that it has been paid even in years of loss, and did not depend upon the earning of profits. It has been found by the tribunal that the first three conditions, if they can be so called, have been fulfilled, but that the last one has not been established and could not be established because the firm was singularly fortunate in having an unbroken record of profits, year after year. It was vehemently argued on behalf of the appellants that as this last condition has not been fulfilled, the tribunal was not justified in law in coming to the conclusion that the claim of traditional or customary bonus at the rate indicated above had been established. In our opinion, this contention is not acceptable for several reasons. Firstly, the four so-called conditions are not really in the nature of conditions precedent but are circumstances which have been taken into account by this court in The Graham Trading Co. (India) Ltd. v. Its Workmen (1) for coming to a conclusion as to whether or not aclaim to customary or traditional bonus had been made out. In the case just referred to, this court pointed out that the tribunal has to consider those four circumstances. That those are circumstances, and not conditions precedent, is shown by the fact that this court has pointed out that the length of the period will depend upon the circumstances of each case. A condition precedent, as such, has to be more definite than one which depends upon the circumstances of each case. Secondly, there is no rational ground for holding that payment even when there were losses is a condition precedent because, as has happened in this case a company or a firm may have an unbroken record of profits ever since it started working. Hence, if it were to be held as a condition precedent, payment of bonus satisfying the three conditions aforesaid but not this one, for however long a period, would have to be held as insufficient to establish the claim for this kind of bonus. Between profits and loss in a particular year, there may be a very small gap. The loss may be of one rupee,; and similarly profits may be equally nominal. The third alternative, which may be supposed, is neither lose nor profit. According to the appellants' contention, the case for such a bonus is made out in the first supposition of a nominal loss, but not of the second or the third alternatives. The law cannot be founded on such unsubstantialconsiderations. The question in such cases is always one of substance, and not of form. We cannot, therefore accept the submission that loss substantial or otherwise is a sine, qua non. The observations of this court in the decisions referred to above must be understood as based on considerations of substance and not of form. Such a bonus has reference to a special occasion like a festival, for example, the Pujas in Bengal and the Dewali in Western India--occasions which are generally utilised by employers to reward the services of their employees. Hence in our opinion, what is more important to negative a plea for customary bonus would be proof that it was made ex gratia, and accepted as such, or that it was unconnected with any such occasion like a festival, as laid down by this court in the case of B.N. Elias and Co. Ltd. Employees' Union v. B.N. Elias and Co. Ltd.(1). In our opinion, therefore, the tribunal was fully justified in finding that the traditional or customary bonus had been established in this case, notwithstanding that it had not been shown, as it could not have been shown, that it was paid in a year of loss. On behalf of the respondents an attempt was made to show that such a bonus could be granted as an implied term of contract of service. But as such a case has not been made in the statement of the case in this court, we did not allow that case to be made out at the time of the arguments. We must make it clear that this court has to be very strict in enforcing the rules of pleading, as laid down in the rules of this court bearing on the question of statement of case of the parties. These rules have been laid down with a view to help the court in narrowing down the controversies between the parties and also for the purpose of giving notice to the other side that a particular question will be raised, and that party should be ready to meet that particular point. This court would not ordinarily permit any laxity in the matter of pleadings in this court, and litigants and their legal advisers must take note of what we have said so often in the course of arguments in a number of cases coming before us recently. ;