1972 (12) TMI 83 - SC - Indian Laws

Summary

Issues Involved:
1. Payment of bonus for the year 1967.
2. Calculation of gross profits and allocable surplus.
3. Deductions claimed as subsidies under item 6(g) of the Second Schedule of the Payment of Bonus Act, 1965.
4. Definition and scope of the term "subsidy."
5. Whether the Joint Plant Committee or the Indian Cotton Mills Federation is a "Body Corporate established by any law for the time being in force."
6. Treatment of amounts received in 1967 but relating to earlier years.

Detailed Analysis:

1. Payment of Bonus for the Year 1967:
The dispute arose regarding the payment of bonus for the year 1967. The Textile Labour Association demanded a bonus at the rate of 6.59% of annual earnings, while the Mills Company contended that only the minimum bonus of 4% was payable.

2. Calculation of Gross Profits and Allocable Surplus:
The Association requested the Mills Company to furnish information regarding the computation of gross profits and allocable surplus. The Mills Company provided the information but claimed certain deductions from the gross profit for calculating the allocable surplus.

3. Deductions Claimed as Subsidies:
The Mills Company claimed deductions amounting to Rs. 32,42,945/- as subsidies under item 6(g) of the Second Schedule of the Payment of Bonus Act, 1965. The Industrial Court allowed deductions for the first two items but not for the remaining three. The items in question were:
- Rs. 8,63,194/- as cash subsidy on export of steel pipes and tubes.
- Rs. 4,25,233/- as cash by way of steel entitlement.
- Rs. 9,33,213/- as Customs Drawback realization.
- Rs. 71,754/- as Railway Freight Rebate.
- Rs. 9,49,551/- as export incentive on cotton textile goods.

4. Definition and Scope of the Term "Subsidy":
The Industrial Court and the Supreme Court examined various dictionary definitions of "subsidy" and concluded that the term should be restricted to direct cash payments and should not include indirect assistance such as Customs Drawback or Railway Freight Rebate. The Court emphasized that the term "subsidy" refers to direct financial aid provided by the government or a public corporation to support an enterprise.

5. Whether the Joint Plant Committee or the Indian Cotton Mills Federation is a "Body Corporate Established by Any Law":
The Industrial Court's decision that the Joint Plant Committee is a government body was not upheld. The Supreme Court found that the Joint Plant Committee, constituted by the Central Government, does not have statutory powers and is not a government body. Similarly, the Indian Cotton Mills Federation, registered under the Companies Act, is not a "Body Corporate established by any law for the time being in force."

6. Treatment of Amounts Received in 1967 but Relating to Earlier Years:
The Court held that amounts received in 1967 but relating to earlier years should be deemed as income for the year 1967. This was based on the principle that accounts maintained on a cash basis should consider the year of receipt as the year of income.

Conclusion:
The appeals of the Mills Company were dismissed, and the appeals of the Association were allowed in part. The Supreme Court held that only direct cash payments should be considered as subsidies under item 6(g) of the Second Schedule, and not indirect assistance. The Industrial Court was directed to re-calculate the bonus based on this interpretation. The Association succeeded in five out of six issues and was awarded costs from the management.