1965 (3) TMI 17 - SC - Income Tax

Whether the tribunal was not justified in reducing the remuneration of the managing director from ₹ 3,500 per month to ₹ 2,500 per month? Whether the tribunal was wrong in not allowing a sum of ₹ 84,000 as further income-tax under section 23A of the Indian Income-tax Act? Whether the tribunal was wrong in allowing rehabilitation at rupees one lakh only and that a much larger sum was properly allowable as rehabilitation? Held that - The question whether the tribunal can reduce the remuneration which is based on a written agreement binding on the employer is therefore left open to be decided in a case where it will matter In the present case the evidence on behalf of the appellant shows that no income-tax was in fact levied on the appellant under section 23A of the Income-tax Act. In these circumstances the tribunal was right in disallowing any claim for income-tax under section 23A of the Income-tax Act. The tribunal was right in holding the appellant to its contention that it required rupees one lakh per year as rehabilitation for the four years 1957-60. It is not disputed that if rehabilitation is only allowed at rupees one lakh, the order of the tribunal granting 10 per centum of the basic earnings for the whole year as bonus cannot be assailed. Appeal dismissed.

Summary

Issues:
1. Dispute over bonus for the year 1959 between the appellant and its workmen.
2. Reduction of managing director's remuneration by the tribunal.
3. Claim of income-tax under section 23A of the Income-tax Act.
4. Rehabilitation amount claimed by the appellant.

Analysis:
1. The Industrial Tribunal, Maharashtra, at Bombay awarded a bonus of 10% of basic earnings for the year 1959 to the workmen, based on the Full Bench formula calculations. The appellant contested, claiming insufficient surplus for bonus payment. The tribunal's decision was challenged in the Supreme Court through special leave. The appellant raised three points: (i) reduction of managing director's remuneration, (ii) disallowance of income-tax claim under section 23A, and (iii) inadequate rehabilitation amount.

2. Regarding the managing director's remuneration, the appellant argued that the tribunal erred in reducing it from Rs. 3,500 to Rs. 2,500 per month. The court noted the written agreement but found it unnecessary to decide as it did not impact the bonus amount. The issue of reducing remuneration based on a binding agreement was left open for future cases.

3. The claim for income-tax under section 23A was contested by the appellant. The court clarified that income-tax under this section is levied based on specific conditions. As no evidence showed actual levy on the appellant, the tribunal rightly disallowed the claim, emphasizing the need for factual proof for such deductions.

4. The appellant sought a higher rehabilitation amount based on expert testimony, but the tribunal approved only Rs. 1 lakh due to past inaction in machinery maintenance. The court upheld this decision, considering the circumstances and a previous agreement with the union. The appellant's right to re-agitate the rehabilitation matter with proper evidence in the future was acknowledged.

In conclusion, the Supreme Court dismissed the appeal, maintaining the tribunal's award of 10% bonus for the workmen. Each party was ordered to bear its own costs, and the appellant was given the opportunity to revisit the rehabilitation issue in the future with substantial evidence of progress.