GAJENDRAGADKAR, - (1.) THE Judgment of the court was delivered by :
(2.) THESE three appeals arise out of two industrial disputes Nos. 24 and 26 of 1951 between the appellants and their workmen. Dispute No. 24 of 1951 had arisen between the management and workers of the Sree Meenakshi Mills Ltd., Madurai, whereas dispute No. 26 of 1951, was between the management and workers of the Thiakesar Alai Manapparai. Both the disputes were in respect of bonus claimed by the workmen for the year 1950- 51. The workmen claimed bonus for the year 1950-51 on the allegation that the two mills constituted one unit and had made profits during the relevant year. On the other hand, the appellants contended that the two mills were two different units and the claims for bonus made by the workmen against themshould not be considered together. According to the appellants, during the relevant year there was a trading loss and as such no bonus was payable to the workers. The Industrial tribunal rejected the pleas raised by the appellants and held that the two mills formed part of the same unit. It also came to the conclusion that for the year in question there was a surplus of Rs. 2,87,676.00 against which the workmen's claim for bonus was justified. That is why the tribunal awarded three months' bonus to the workmen. Against this decision the appellants preferred two appeals Nos. 133 and 134 of 1952 to the Labour Appellate tribunal of India at Madras. In these appeals the appellants challenged the findings made by the tribunal against them and urged that bonus was not payable during the relevant year. The workmen also preferred an appeal, No. 168 of 1952, and in this appeal they claimed a larger bonus than what had been awarded by the tribunal below. The appellate tribunal confirmed the finding of the tribunal that the two mills formed part of the same unit. According to the appellate tribunal, the net surplus available for distribution as bonus came to Rs. 2,57,496.00. The claim made by the appellants in respect of various deductions was examined by the appellate tribunal and deductions were substantially, disallowed in respect of three items. In respect of an amount of Rs. 8,43,927.00 claimed by the appellants as depreciation on machinery and buildings the appellate tribunal concurred with the industrial tribunal in holding that the claim only for a sum of Rs. 4,00,000.00 was admissible; in other words, a claim for deducting the balance of Rs. 4,43,927.00 was disallowed. It is this finding in particular with which we are directly concerned in the present appeals. it may be pointed out at this stage that in determining the amount of net surplus available for distribution as bonus, the appellate tribunal agreed with the industrial tribunal that the provision for taxation made by the appellants to the extent of Rs. 1,75,000.00 was adequate. In the result, the appeals preferred by the appellants as well as the respondents failed and were dismissed by the appellate tribunal. Against the order dismissing their appeals, the appellants have preferred to this court by special leave the present Civil Appeals Nos. 218 and 219 of 1956. The appellants had also preferred an application for review before the Labour Appellate tribunal, Misc. Case No. III-C- 387 of 1953 (Review) on the ground that the order passed by the Labour Appellate tribunal was patently erroneous inasmuch as there was a mistake apparent on the face of the record which should be corrected under the appellate tribunal's powers of review. The appellate tribunal hold that it had no power of review and that,- even if it bad such a power, no case had been made out for the exercise of such power because there was no mistake apparent on the face of the record which could not have been discovered whet) the order was made in the presence of the parties. Against this decision, the appellants have preferred to this court by special leave the present Civil A peal No. 217 of 1956. In appeals Nos. 218 and 219 of 1956, the main point which has been urged before us on behalf of the appellants is that the appellate tribunal erred in law in disallowing the appellants' claim in respect of depreciation debited by the appellants to the extent of Rs. 4,43,927.00. In the appeal preferred against the order passed by the appellate tribunal refusing to review its decision, it has been urged before us by the learned counsel for the appellants that the appellate tribunal was in error in holding that it had no jurisdiction to review its decision under 0. 47 of the Code of Civil Procedure. It has also been argued that on the merits it was wrong to have held that the appellants had failed to make out a case for the exercise of the said jurisdiction. It may be relevant at this stage to set out the financial position of the appellants during the relevant year as summed up in the judgment of the appellate tribunal: JUDGEMENT_153_AIR(SC)_1958Html1.htm 156 Thus the net surplus available fordistribution asbonus comes to Rs. 16,44,838.00 minusRs. 13,87,342. Rs. 2,57,496.00.' Since in the present appeals we areconcerned only with the amount of depreciation debited by the appellants, it would be useful to set out the depreciation analysis as explained by the representative of the appellants in the court of the Industrial tribunal. The depreciation analysis, according to this statement, is made thus as per the Incometax Act: JUDGEMENT_153_AIR(SC)_1958Html2.htm It would be noticed that the total of these amounts comes to Rs. 8,82,329.00.
(3.) THE true nature and character of the workmen's claim for bonus againsttheir employers is now well settled. Bonus is not, as its etymological meaning would suggest, a mere matter of bounty gratuitously made by the employer to his employees ; nor is it a matter of deferred wages. It has been held by this court in Muir Mills Co. Ltd. v. Suti Mills Mazdoor Union, Kanpur (1) that ' the term 'bonus' is applied to a cash payment made in addition to wages. It generally represents the cash incentive given conditionally on certain standards of attendance and efficiency being attained.' This decision is based on the view that both labour and capital contribute to the earnings of the industrial concern and so it is but fair that labour should derive some benefit if there is surplus available for that purpose. Even go, the claim for bonus cannot be effectively made unless two conditions are satisfied; the wages paid to workmen fall short of what can be properly described as living wages; and the industry must be shown to have made profits which are partly the result of the contribution made by the workmen in increasing production. In determining the question as to whether the industry has made profit, and, if so, how much is the net surplus in a given year, provision has first to be made in respect of prior charges. This principle has been recognized by what is often described as the full bench formula as laid down in the matter of The -Mill Owners Association, Bombay v. The Rashtriya Mill Mazdoor Sangh, Bombay (1). According to this formula, distributable surplus has to be ascertained after providing from the gross profits for (1) depreciation, (2) rehabilitation, (3) return at 6% on the paid-up capital, (4) return on the working capital at a lesser but reasonable rate, and (5) for an estimated amount in respect of the payment of income-tax. It is common ground before us that the question as to whether the workmen's claim for bonus is justified or not must be decided in the light of this full bench Formula. The appellants concede that in determining the question as to whether they have made a trading profit during the relevant year the industrial tribunal is not required to adopt the same basis as under the Income-tax Act. It is, however, urged that in dealing with this question there is no justification for not giving effect to the relevant provisions of the Incometax Act in respect of depreciation. Section 10 of the Income-tax Act provides for three kinds of allowances in respect of depreciation. Section 10 (vi) deals with allowances in respect of depreciation of buildings, machinery, plant or furniture used for the purposes of the business, being the property of the assessee, of a sum equivalent to such percentage on the original cost thereof to the assessee as may in any case or class of cases be prescribed and in any other cases, to such percentage on the written-down value thereof as may in any case or class of cases be prescribed. This allowance is in respect of what is described as normal depreciation. Section 10 (vi) further provides for what is described as initial depreciation in cases where the buildings have been newly erected or the machinery or plant being new, (not being machinery or plant entitled to the development rebate under el. (vi-b)), has been( installed after 31/03/1945, a further sum (which shall however not be deductible in determining the written-down value for the purpose of this clause) in respect of the year of erection or installation as prescribed by cls. (a), (b) and (c) of s. 10 (vi). Then s. 10 (vi-a) provides for allowances of what is described as additional depreciation. This is in respect of depreciation of buildings newly erected or of machinery or plant being new which has been installed after 31/03/1948. Section 10 (vi-b) also provides for allowance 'in respect of machinery or plant being new, which has been installed after the 31st day of March, 1954, and which is wholly used for the purposes of the business carried on by the assessee, a sum by way of development rebate in respect of the year of installation equivalent to twenty-five per cent. of the actual cost of such machinery or plant to the assessee: Provided that no allowance under this clause shall be made unless the particulars prescribed for the purpose of clause (vi) have been furnished by the assessee in respect of such machinery or plant.' The question which arises for decision is whether, in determining the question as to whether net surplus is available for distribution by way of bonus or not, it is obligatory on the industrial tribunals to allow the whole of the depreciation admissible under the said provisions of the Income-tax Act. ;