1963 (4) TMI 90 - SC - Indian Laws

Summary

Issues Involved:

1. Calculation of Gross Profits for the Year 1956-57
2. Calculation of Income-Tax for All Four Years
3. Calculation of Working Capital for All Four Years
4. Calculation of Rehabilitation for All Four Years

Issue-wise Detailed Analysis:

Re. (1): Calculation of Gross Profits for the Year 1956-57

The tribunal's calculation of gross profits for the year 1956-57 was contested by the workmen. The issue arose due to the revaluation of stock, which increased the value by Rs. 38,81,618/-. The tribunal ignored this revaluation, considering it an extraneous profit based on the Tata Oil Mills Co. Ltd. v. Its Workmen case. The court found merit in the workmen's contention, stating that the revaluation should not have been considered as actual consumption cost. The matter requires further investigation, and expert evidence may be necessary to determine the correct gross profits, leading to a remand for this purpose.

Re. (2): Calculation of Income-Tax for All Four Years

The tribunal calculated income-tax by considering notional normal depreciation instead of statutory depreciation. The court referred to the Sree Meenakshi Mills Ltd. v. Their Workmen and Associated Cement Companies cases, emphasizing that statutory depreciation should be considered. The appellants' contention that statutory depreciation is higher was not effectively countered by the respondents. Due to the lack of concrete evidence, the matter is remanded to the tribunal for further evidence and correct calculation of income-tax.

Re. (3): Calculation of Working Capital for All Four Years

Three contentions were raised regarding working capital:

1. The tribunal relied on the balance-sheet without proper evidence, which is against the principle established in Petlad Turkey Red Dye Works Ltd. v. Dyes & Chemical Workers' Union. The tribunal accepted the lower figure provided by the respondent's accountant without effective cross-examination. Proper evidence is expected on remand.

2. Investments were assumed to be part of working capital without evidence. The court clarified that investments can only be considered working capital if there is evidence of their actual use. The tribunal must re-evaluate this on remand.

3. Advances were taken en bloc as working capital. The court stated that only advances used for business purposes can be considered working capital. The tribunal is required to reassess this with proper evidence.

Re. (4): Calculation of Rehabilitation for All Four Years

The tribunal's rehabilitation calculations were contested by the appellants, who argued that the tribunal made two basic errors:

1. Ignoring previous rehabilitation allowances, leading to inflated figures.
2. Not giving credit for available reserves, further inflating the rehabilitation amount.

The court agreed with the appellants, stating that rehabilitation is a long-term matter and should not increase annually without significant changes. The tribunal must consider previous allowances and available reserves. The court also clarified the principles from the Khandesh Spg. & Wvg. Mills Co. Ltd. case, emphasizing that only reserves earmarked for specific purposes or in the form of raw materials should not be deducted from the rehabilitation amount. The tribunal is directed to recalculate the rehabilitation amount accordingly.

Conclusion:

The tribunal is directed to recalculate the available surplus, considering the court's observations, and submit its findings within three months. The case is remanded for further evidence and proper calculations on all four issues.