SHELAT. - (1.) THE following Judgment of the courtwas delivered by:-
(2.) BY a reference dated 17/09/1965, the government ofWest Bengal referred to the Sixth Indus-trial tribunal the following question foradjudication: "Whether computation of bonus in res-pect of the accounting year ending 3 1/03/1965, payable to the employees isin accordance with the Payment of BonusOrdinance? If not, what should be thequantum of bonus for the employees?" The dispute between the appellant-company and its employees arose in thefollowing manner. The company's ac-counting year is from 1st April to 31stMarch of the following year and its booksof account are maintained on the mercan-tile system of accounting. The companycomputed the amount of bonus payable toits employees under the Payment ofBonus Ordinance which was promulgatedon 29/05/1965 and furnished on July 5,196,5 copies of its computation to thethree respondent Unions representing itsemployees. The available surplus ana al-locable surplus, according to this compu-tation, were Rs. 49.96 lacs and Rs. 29.98lacs respectively. On this basis the com-pany declared the bonus at 13.28 per centof the total wages paid to the employees.According to this computation, the grossprofits came to Rs. 2,70,64,234.00. Out ofthis the company deducted the followingamounts allowed under the Ordinance,namely: JUDGEMENT_612_AIR(SC)_1969Html1.htm Thus the available surplus came toRs. 49,96,876, sixty per cent of which,namely, Rs. 29,98,125.00 was the allocablesurplus. The employees disputed thecomputation contending that the companyhad wrongly reduced the the gross profits andthe available surplus and that the follow-ing amounts should be added back, viz.,provision for gratuity Rs. 18,38,605.00 andprovision for doubtful debts Rs. 50,000.00.They also challenged deduction of inte-rest on the reserves on the ground thatthe capital reserve of Rs. 57,00,151.00 wasartificially arrived a by a mere revalu-ation of the company's fixed assets as on 1/04/1956. They also disputed thefigures of depreciation, development re-bate and direct taxes deducted by thecompany while working out the availablesurplus. Parliament in the meantime pass-ed the Payment of Bonus Act, 1965which by Section 40 repealed the Ordin-ance but which saved all things doneand action taken under the Ordinanceas having been done or taken under theAct. On 27/09/1965 the companypaid, subject to the result of the refer-ence, bonus at the rate of 13.28 per centof the wages including dearness allowanceto its employees.
(3.) IN its award the tribunal allowedRs. 23,48,226 instead of Rs. 28,82,261.00claimed by the company as depreciation.Similarly it allowed only Rs. 7 lacs in-stead of Rs, 8.87,371.00 claimed by the com-pany as development rebate. As regardsRs. 18.33 lacs claimed under the head ofgratuity, the tribunal held that thatamount was not a reserve but a provision617and, therefore, was not liable to be addedback. But it held that the company coulddeduct only Rs. 10 lacs and odd as alsoRs. 1.31 lacs and Rs. 87,000.00 and odd ac-tually paid during the year to employeeswho retired during that year and addedback the balance of Rs. 6 lacs to the grossprofits. Except for these amounts, theTribunal accepted the rest of the com-pany's computation. IN the result theTribunal found the available surplus andthe allocable surplus to be 54 lacs andodd and Rs. 32.42 lacs respectively, anddirected payment of bonus at 14.55 percent of the total wages. Both the Unionsand the Company obtained special leaveand filed appeal challenging the correct-ness of the Award. In the profit and loss account forthe year 1964-65, the Company hadshown Rs. 17 crores and odd as grossreceipts and out of that amount had de-ducted diverse amounts as expenditure in-cluding the sum of Rs. 23,48,226 by wayof depreciation. In its computation filedbefore the tribunal, the Company, how-ever, claimed depreciation at Rs. 28.82lacs worked out by its auditors in accord-ance with the provisions of the Income-tax Act, 1961. The Unions disputed thisamount on the ground (l) that there wasno evidence that the amount of deprecia-tion came to Rs. 28.82 lacs and (2) thatsince the profit and loss account men-tioned Rs. 23.48 lacs as depreciation, thecompany could claim that amount only,The tribunal accepted the Unions' con-tention staling that there was nothing toshow that the company through mistakehad shown Rs. 23.48 lacs as deprecia-tion in the profit and loss account andthat subsequently on finding out themistake ' it had revised in its computa-tion depreciation at Rs. 28.82 lacs.The tribunal, as we shall presently show,was in error in confusing depreciationclaimed by it as a deduction under Sec-tion 6 of the Act and in thinking that thecompany had made or daimed to havemade a mistake and was trying to cor-rect such mistake.;