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TMI Blog1963 (4) TMI 90X X X X Extracts X X X X X X X X Extracts X X X X ..... d approved by this Court in the Associated Cement Companies Ltd. v. Its Workmen (1959)ILLJ644SC , that there was no surplus in any of the four years for the grant of bonus and therefore rejected the claim of the workmen. The two appeals are by the two unions against this award. 3. The contention of the workmen is that the tribunal's conclusion that there was no available surplus in any of the years is incorrect and four points have been urged in this connection to show how the tribunal went wrong. These points are : (1) The tribunal's calculation of gross profits for the years 1956-57 was wrong; (2) The tribunal went wrong in the matter of calculation of income-tax for all the four years; (3) The tribunal went wrong in the matter of calculating working capital for all the four years; and (4) The tribunal went wrong in calculating rehabilitation for all the four years. We shall deal with these points one by one. Re. (1). 4. The contention in this behalf is that for the year 1956-57 the mills revalued their stock of raw materials, chemicals and dyes etc. as well as general stores, machine furnishings etc. and paper stock as well as coal stock. This revaluation result ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the position clearly to us. We are of the opinion that the matter requires looking into and evidence may have to be taken to find out how exactly the real profits have been affected by showing on the debit side as consumption the valuation of raw materials etc. at the revaluation cost. The matter will therefore have to be investigated further. But it may be added that if the stocks are revalued that is no reason for showing the revalued cost on the debit side as consumption, for in reality, the revalued price is not what the mills paid for the raw materials etc., consumed and therefore to get a correct picture of the actual profit made, it is only the original cost price which will have to be taken into account for that purpose, for that is what the mills actually paid for acquiring the raw materials. Further on sale of paper, the profit made must be on the original valuation of paper stock and not on the revalued figure which was not the cost to the mills of making the paper. Finally it will also have to be considered what is the effect of the so-called contra-entry on the credit side of the profit and loss account for that year. Expert evidence may be necessary to explain the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which was deducted by the tribunal from gross profits in arriving at the income-tax payable. But as the appellants were unable to point out any evidence beyond their own charts to prove the exact statutory depreciation for the years in controversy, it is not possible for us to calculate the correct amount of income-tax to be deducted in the absence of such evidence. The matter will therefore have to go back to the tribunal for taking further evidence on this point and then arriving at the amount payable as income-tax after deducting statutory depreciation from gross profits. Re. (3). 7. Three contentions have been raised in this respect on behalf of the appellants. It is now well settled that a balance-sheet cannot be taken as proof of a claim of what portion of reserves has actually been used as working capital and that the utilization of a portion of the reserves as working capital has to be proved by the employer by evidence on affidavit or otherwise after giving opportunity to the workmen to contest the correctness of such evidence by cross-examination : (see Petlad Turkey Red Dye Works Ltd. v. Dyes Chemical Workers' Union (1960)ILLJ548SC . What happened in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or not. For example, where investments at the beginning of the particular year were of a particular kind and the same investments appear at the end of the year without any change, it cannot be said that the amount invested has been used as working capital. We may make this clearer by a hypothetical example. Suppose at the beginning of the year the employer has investments in government securities of 3 percent conversion loan to the tune of 20 lacs. At the end of the year also, the same investment continues in the same form, namely 3 percent conversion loan for Rupees twenty lacs. In those circumstances it cannot be said that this investment has been used during the year as working capital. On the other hand where investments have been realised during the year and actually used as working capital, evidence can be given to show that this has happened and then the investments so realised and used as working capital can be taken to be part of the working capital for the year. If such a thing has happened the balance-sheet will show that though, for example, at the beginning of the year the investment consisted of 3 percent conversion for loan for ₹ 20 lacs but at the end of the y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion in connection with the respondent-mills for the year 1954-55, i.e., just before the four years now in dispute. On that occasion, the tribunal found that the total amount necessary for rehabilitation was ₹ 43.39 lacs per year; but in the four years in dispute the tribunal has increased this amount to ₹ 63.56 lacs in 1955-56 and ₹ 67.66 lacs in 1956-57. As for the years 1957-58 and 1958-59 the tribunal has found the rehabilitation amount only for the pre-1939 block as ₹ 64.59 lacks and ₹ 64.71 lacs respectively. The appellants contend that these calculations are incorrect and that rehabilitation calculations are a long term matter and there was no reason for rehabilitation amount to go up as compared to that for 1954-55 as there was no appreciable change in prices during the four years in dispute as compared to the prices in 1954-55. It is conceded that rehabilitation may have increased slightly on account of new blocks which came into existence after 1954-55. Even so it is urged that the tribunal has fallen into two basic errors and that is how it came to arrive at such an inflated figure of rehabilitation for the years in dispute as compared to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ehabilitation in the meantime, has to be taken into account in arriving at the amount required for rehabilitation. The same result can be arrived at in other way, provided there is no appreciable rise in price, by taking the rehabilitation amount once arrived at and adding to it such amounts as may be due for rehabilitation for new blocks and also such amounts as may not have been left in the hands of the employer in the previous years, because the available surplus in his hand after allowing all other prior charges was less than the rehabilitation amount found due. In any case the tribunal was certainly wrong in not taking into account the rehabilitation amounts allowed in previous years in working out the rehabilitation amount for the years in dispute. 13. The second error into which the tribunal fell was in the matter of deducting the amount available from liquid reserves other than those ear-marked for specific purposes. What the tribunal did in this case was that it did not properly take into account the liquid reserves available and deduct them from the rehabilitation amount found due by it. The tribunal seems to have held that whatever sum was working capital could not be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ook at the balance sheet we have to find out the liquid assets available at the end of the year from which the amount available as working capital for the next year may be arrived at. But the liquid assets available at the end of the year will usually be of two kinds; firstly there will be cash assets in the various reserves and secondly there will be assets in the shape of raw materials, etc. and both together become the available working capital for the next year subject to necessary adjustments and also subject to the evidence that they were actually used as working capital. Now, what was laid down in the Khandesh Spg. Wvg. Co.'s case (1960)ILLJ541SC , when it was said that the amount which had been actually used as working capital could not be deducted from the gross rehabilitation amount was that part of the working capital which is in the shape of raw materials etc. could not be deducted. The distinction which we have pointed out did not arise for consideration in that case, for it was held that in that case that there was no evidence to show that any part of such reserves had in fact been used as working capital and this Court upheld the award of the industrial court d ..... X X X X Extracts X X X X X X X X Extracts X X X X
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