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TMI Blog1971 (8) TMI 221X X X X Extracts X X X X X X X X Extracts X X X X ..... Electricity Supply Co., and in this Appeal by Special Leave challenges the Award made against it, by the Industrial Tribunal (111) at Allahabad on 15th November 1965. The dispute between the Appellant and its Workmen is one relating to the bonus payable for the year 1960-61. As an amicable settlement could not be arrived at, the State of U. P. by its order dated 24-1-1962 referred the following dispute for adjudication to the Tribunal: "Should the employers be required to pay bonus to their workmen for the year 1960-61 ? If so, at what rate and with what details ?" The case of the Appellant was that after allowing for prior charges no available surplus was left for the payment of bonus to workmen. According to the Company a gross profit of Rs. 6,06,684/- was earned for the year ending 31st March, 1961, but the Tribunal added to it a sum of Rs. 9,949/- as representing extraneous income and consequently computed the gross profit at Rs. 6,16,633/-. The following prior charges were claimed by the Appellant and we have indicated as against each one of these in the opposite columns what the Tribunal has awarded and disallowed:- Amount claimed by the Appellant Amount allowed by the T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of plant and machinery either in the year in dispute or in any subsequent year; that no rehabilitation allowance was claimed in the previous year; that the cost of the assets of the Company had not been duly proved as engineers were not called and that the quotations produced by the Company could not be relied upon. The return on working capital was disallowed on two grounds; namely that the calculation of the working capital has been made on the basis of the assets and rehabilitation as they stood on the closing day of the year 1960-61 namely on 31-3-61 Which is a mistake because whatever may have been the assets and liabilities at the end of the year they would not be the same at the beginning of the year nor could they be applied as the working capital. The second ground is that on the evidence it cannot be established that any reserves were utilised as working capital, nor was there any necessity to do so. Before us the learned Advocate of the Appellant has urged that the Tribunal was not justified in rejecting the material placed before it, from which the several deductions claimed by it ought to have been allowed in computing the available surplus. It will be convenient t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erity of the concern during the year under review which is reflected in the amount of surplus; the needs of labour at existing wages is also a consideration of importance. It observed in para 37: "........ but we should make it plain that these are not necessarily the only considerations; for instance no scheme of allocation of bonus could be completed if the amount of which bonus is to be paid is unrelated to the employees" efforts; and even when we have mentioned all these considerations we must not be deemed to have exhausted the subject". This Court in Muir Mills Co. Ltd. v Suti Mill Mazdoor Union, Kanpur([1955] (1) S.C.R. 991), generally accepted as sound the view of the Full Bench, that since labour and capital both contribute to the earnings they should derive benefit, if there is a surplus after meeting the four prior or necessary charges specified in the formula. However, neither the priority as between the four prior charges and their relative acceptance nor the conditions upon which they were allowed was examined by this Court, but it was nevertheless held that bonus is neither a gratuity nor gift nor can it be regarded as deferred payment. The principles enunciated b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the U. P. Electricity case the Full Bench did in fact apply the income-tax Rules for ascertaining depreciation. In Ahmedabad Miscellaneous Industrial Workers Union v. Ahmedabad Electricity Co. Ltd.([1962] 2 S.C.R. 934) the Full Rench formula applying the Income-tax Act rules to ascertain depreciation as a prior charge was approved. It was also observed that it was not open to the Appellant to raise the question that the provisions of the seventh schedule to the Electricity (Supply) Act should be applied for purposes of calculating depreciation in preference to the income-tax rules in working ,out the Full Bench formula. Even on the assumption that the question was still open, because as Wanchoo, J., -observed "it was never directly raised in this Court and specifically decided" they were of opinion that the Incometax rules should be applied in preference to the provisions of the Seventh Schedule to the Electricity (Supply) Act. The reasons for arriving at that conclusion are given at pages 939-941. In Associated Cement Companies Ltd. v. Its Workmen(1959 S.C.R. 925), Gajendra gadker, J., (as he then was) said at page 944 with reference to Muir Mills Company case that: "neither the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as a Unit self sufficient by itself the decision of the Labour Tribunal in regard to the refund of excess profits tax and the adjustment of the previous years depreci-ation and losses against the bonus year's profit must be treated as logical and sound.' (3)The ascertainment of depreciation is according to the Income-tax Act and what is allowed as a prior charge is the annual notional normal depreciation and not the actual depreciation which is in fact allowed. The formula of the Full Bench in the U.P. Electricity case as explained and clarified in Surat Electricity"Co. Ltd. Staff Union v. 'Surat Electricity Co. Ltd., ([1957] (2) L..LJ. 648) was approved in the Ahmedabad Miscellaneous Industrial Workers Union case and in the case in Hamdard Dawakhana Wakf v. Its Work-. men & Ors. ([1962] (2) L.L.J. 772) Apart from the notional normal depreciation the depreciation allowable under Income-tax Act for multiple shift is also allowable. (4)In calculating the Income-tax for deduction as prior charge it is not the notional normal depreciation alone that has to be deducted but the statutory depreciation namely the concessions given under the Income-tax Act to the employers which would ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so the claim for replacements and modernization. It is quite conceivable that certain parts of machines, which constitute a block may need rehabilitation though the block itself can carry on for a number of years. This process of rehabilitation is a continued process and unlike replacement, its date cannot always be fixed or anticipated. So with modernization all these three items are included in the claim for rehabilitation. It is therefore necessary for tribunals to exercise their discretion in admitting all available evidence to determine this difficult question. For a fuller discussion in see: The Associated Cement Companies case at pages 966-968. The probable cost is reached by adopting a multiplier based on the rates between the cost price of the plant and machinery and the probable price which may have to be paid for its rehabilitation, replacement or modernization. The older the plant, the higher the multiplier and hence the area of conflict between the employer and employees is larger, the former allowing the asset to become older to get a higher multiplier and the latter feeling aggrieved because of it as the provision made therefor reduces the available surplus in the bo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the light of our observations as to the formula applicable in determining its validity or otherwise. At the outset it may be noted that on behalf of the Appellant only a solitary witness, M. K. Ghosh a Chartered Accountant of the Company who on his own admission had joined the Company six months prior to his giving_ evidence was produced. Obviously this witness could not speak about the relevant matters from his personal' knowledge. Apart from this infirmity the Tribunal has characterised his eividence as contradictory, evasive and not reliable. Innumerable statements, letters, balancesheet, profit and loss account and other documents called for or otherwise were filed on behalf of the Appellants. It cannot be denied that the mere filing of any of the aforementioned documents does not amount to proof of them and unless these are either admitted by the Respondents. or proved they do not become evidence in the case. On this aspect it was observed in Associated Cement Companies case at page 956: "As a general rule the amount of gross profits thus ascertained is accepted without submitting the, statement of the profit and loss account to close scrutiny. If however, it appears that e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. When so much depends on this item, the principles of equity and ,justice demand that an Industrial Court should insist upon a clear proof of the same and also give a real and adequate opportunity to the Labour to canvass the correctness of the particulars furnished by the employer," At Pages 847-850, the Indian Hume Pipe Co's case (citation given is incorrect--the -correct citation is 1959 (2) LLJ 357) -Tata Oil Mills Co. Ltd., Vs.. Its Workmen (citation given in the report incorrect) and Anil Strach Products Ltd. v. Ahmedabad Chemical Workers Union, cases (Civil Appeal No. 684 of 1957) were referred to and discussed. It was pointed out that Anil Starch Products Ltd., again reinforced the view of this Court that proper opportunity should be given to the labour to test the correctness of the evidence given on affidavit on behalf of the management in regard -to the use of the reserves as working capital. In Petlad Turkey Red Dye Works Ltd., v. Dyes & Chemical Workers Union, Petlad & Anr. (1)., the question whether the balance-sheet can be taken as proof of claim as to a portion of the reserve that has been used as working capital was again considered. The Khandesh Spinning & & W ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ablished and proved the requirements relating to proof can be dispensed with. The case referred to above was dealing with an enquiry into the misconduct of the Public Servant in which he complained he was not permitted to cross-examine. It however turned out that he was allowed to put questions and that the evidence was recorded in his presence. No doubt the procedure prescribed in the Evidence Act by first requiring his chief-examination then to allow the delinquent to exercise his right to crossexamine him was not followed, but that ,the Enquiry Officer, took upon himself to cross-examine the witnesses from the very start. It was contended that this method would violate the well recognised rules of procedure. In these circumstances it was observed at page 264: "Now it is no doubt true that the evidence of the Respondent and his witnesses was not taken in the mode prescribed in the Evidence Act; but that Act has no application to enquiries conducted by Tribunal even though they may be judicial in character. The law requires that such Tribunals should observe rules of natural justice in the conduct of the enquiry and if they do so their decision is not liable to be impeached on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en into consideration for determining the amount of bonus to be declared out of the available surplus. The first claim is in respect of depreciation on account of double shift. The Appellant did not claim any depreciation in respect of electric cables. The only was relating to plant and machinery which comprises of boilers and turbines. Ghosh P. W. I stated that the plant and machinery worked more than double shift. In support of his statement he filed Exhibit E. 16 which he stated was correct as he had verified it from the records. Exhibit E.- 16 is not a document prepared by the witness but appears to have been prepared and signed by the Resident Engineer, according to which the total number of hours which the four boilers and the four turbines had worked during 1960-61. So far as boilers are concerned all of them are said to have worked 21,327 hours the average of which for each boiler for the year was computed at 5,331 8 hours. Similarly the turbines worked 21,629 hours which works out to an average of 5412 -3 hours per turbine per year. If the year is taken as 365 days the average for the boiler and turbine works out to 14.6 and 14.8 hours while if it is taken as 300 days it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uted Income-tax @ 45% amounting to. Rs. 1,04,415/-. If the contention of the learned Advocate, for the Appellant was accepted and only the notional nor-mal depreciation alone was deducted for computing the Income-tax the Income-tax deductible would come to Rs.. 1,26,748/-. It was again sought to be contended that the development rebate on plant installed @ 25 % on, Rs. 1,28,513/- amounting to Rs. 49,628/- could not form. part of the statutory reserve which together with the notional normal depreciation came to Rs. 2,52,4421-. It was submitted that development rebate is not one of the species of' depreciation; that it is a rebate for development which is, dehors depreciation and has nothing to do with the written down value of the asset for calculating depreciation. From the Tribunal's order it would appear that there was no dispute with respect to the provision for Income-tax or its. quantum because after deducting the amount of statutory depreciation the amount as computed at 45 % is Rs. 1,04,415/- which was the amount claimed by it as statutory reserve as per Ex. E. 13. That the deduction of statutory allowance for computing Income-tax is the true principleis borne out by the dec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ocate for the Appellant had to concede that the 'Tribunal was right in rejecting this basis as the basis for working capital. What he says should have been done ,was to have taken the amount at the beginning of the year namely 1st April 1960 and to add to this amount the amount of reserve actually utilised during the bonus year as working capital. The evidence of Ghosh in this as in other matters was of little assistance to the Appellant. While he stated that Rs. 10,09,000/- was the working capital of the Company during the year, in cross-examination he admitted that the consumers deposits have been used in the business as working capital. Later on he sought to explain it by an application in which he said that what he meant was that the consumers deposit had been invested in the business. The Tribunal has carefully gone through this evidence and was of the view that Ghosh has given contradictory and false statements in respect of the consumers deposits not being used as working capital. This apart as already stated, he as no personal knowledge. In any case the Tribunal has on an examination of the Cash Book and profit and loss account Ex. W. 16 and E. I held that the receipts of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ves of the firms whose letters they are. As has been noticed Ghosh is the omnibus witness and he has no knowledge whatever in respect of any of the matters- stated therein nor can he speak to the precise requirement for rehabilitation. It is rather surprising that the employer who is making such a big claim have not called any one as a witness who can speak with knowledge of the age, the, requirements and the increase in the prices of replacements. The original cost ,of these blocks has been prepared by Shri Chatterji (Ex. E. 19 and Ex. 20). But he has, not been produced and an ,attempt was made to prove them through the evidence of Ghosh. The Tribunal states that a number of questions were put to the witness to ascertain as to how he calculated the original cost and his reply was that the same has been taken from the balance-sheet. The balance-sheets for ,earlier years have also not been produced to show what the original cost was. The Tribunal has examined these matters and the evidence relating thereto in great detail ,and we agree with it that the Appellant has failed to prove the original cost of the machines, plant and machinery, its age, the probable requirements for replace ..... X X X X Extracts X X X X X X X X Extracts X X X X
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