THE SREE MEENAKSHI MILLS, LTD. v. THEIR WORKMEN
Citation: [1958] 1 S.C.R. 878; 1957 INSC 98
Court: Supreme Court of India
Bench: NATWARLAL HARILAL BHAGWATI , SYED JAFFER IMAM, P.B. GAJENDRAGADKAR
Judgment date:
Case summary
1957 INSC 98. Supreme Court of India judgment dated 1957-11-05. THE SREE MEENAKSHI MILLS, LTD. v. THEIR WORKMEN. Read the judgment and case details on...
Judgment text
S. C. R. SUPREME COURT REPORTS 879 Appellate Tribunal nor was either of them mentioned in the statement of case filed by the respondents in this Court. Th ly the parti-clila'ts, that itself woilld not justify a drastic reduction in the amount of depteCiation claimed by the appel- . Ia:rits. He argues that the balance-sheet of the appellants has been duly audited and it was not reasonable for the tribunals to have disallowed such a large amount as Rs. 4,43,927 uncier the claim of depreciation. It is fairly conc~ded by hiin that if the triblinals b~low were not boun~ to grant. Claims for depreciation on what is described as initial and additional depreciations, then . he could not challenge the proprlety or correctness of the decision of the tribunals in disallowing the items . appearing . in tl:ie depreciation acc:ount in respect of _these depreciations. It is in the light of these facts that the question raised by the appellants must be considered.
This question has been decided by a Full Bench of the Labour Appellate Tribunal in U. P. E_! ectric Supply Co. Ltli. v. Their Workinen('). It is true that the qttestion of bonus had to be considered in this case in the light of the provisions of the U. P. Electricity (Supply) Act, 1! 148. Nevertheless the Full Bench has dealt with this matter on general considerations and has set at rest the divergence of views expressed by differ~nt Benches of the tribunal on this point. According to this decision, the initial depreciation and additional depreciation are in a sense abnormal additions to the income-tax depreciation and they are designed to meet particular contingencies and for a limited period. It would, therefore, not be fair to the workmen that these two depreciations are rated as prior charges before the available surplus is ascertained. It is likely tha. t, in many cases, if these.
two Gafe11dragadkar depreciations are allowed as prior charges no surplus would be left even though workmen may have laboured during the year to the best of their ability and the concern was for all purposes prosperous; In other words, according to this decision, considerations on which the grant of additional depreciation may be justified under the Income-tax Act are different from considerations of social justice and fair apportionment on which the original Full Bench formula in regard to the payment of bonus to the workmen is based. That is why, in the result, this subsequent Full Bench held that only normal depreciation including multiple shift depreciation, but not. initial or additional depreciation, should rank as prior charge in applying the Full Bench forrnula as to the payment of bonus.
If it cannot be disputed that in industrial adjudication it is not obligatory fo adopt the very same procedure as prescribed by the Income-tax Act for ascertaining gross profits and then determining the amount of ,net surplus available, it is not easy to accept the appellants' argument that in respect of depreciation alone industrial tribunals must necessarily and in . every case follow the relevant provisions of the lncome-tax Act. If that be the true position, then we see no reason why, in respect of one item of debit only the technical provisions of the Income-tax Act must be followed in industrial adjudications in respect of workmen's claim for bonus. On the whole, the reasons given by the appellate tribunal in the case of The U. P. Electric Supply Co. Ltd.
(1) appear to us to be satisfactory; and so we are not prepared to accept the appellant's argument that the appellate tribunal in the present case has erred in law in not allowing the appellant's claim for initial and additional depreciations. In our opinion, therefore, the main point urged by the (1) [1955] I .. A. C. 659. (I) [1955] L. A. C; 659. 888 SUPRE? vlE COURT REPORTS (1958] appellants in Appeals Nos. 218 and 219 of 1956 cannot succeed. MHh, That takes us to the two other points r:iirnd by the appellants in Appeal No, 217 of 1956. 'The first point which has been raised in this appeal by the appellants J. is about the jurisdiction of the appellate tribunal to review its own orders in appropriate ca~s under 0. 47 of the Code of Civil Procedure. This Court has recently· had occasion to consider the question about the applicability of the Code of Civil Procedure to the proceedings before the Labour Appellate Tribunal in Mis. Martin Burn Ltd. v. R. N. Banerjee (Civil Appeal No.
92 of 1957). Section 9(1) ands. 10 of the Industrial Disputes (Appellate Tribunal) Act, 1950, as well as the relevant rules and orders framed under the Act were considered and it was held that the Code of Civil Procedure applies to the proceedings before the appellate tribunal with the result that the appellate tribunal can exercise its powers under 0. 41, r. 21 as well as under s. 151 of the Code. It is true that in this case there was no occasion to consider the applicability of the provisions of 0. 47 of the Code but that does not make any difference. If the Code of Civil Procedure applies to the proceedings before the Labour Appellate Tribunal, it is clear that the provisions of 0. 47 . would apply to these proceedings as much as s. 151 of the Code or the provisions of 0. 41. We must accordingly hold that the appellate tribunal erred in law in coming to the conclusion that it had no jurisdiction to review its own order under the provisions of 0. 47 of the Code.
As we have already pointed out, the appellate tribunal has also held that even if it had jurisdiction to review its decision or judgment, in the present case it would not grant the appellants' request because it had not been i;hown that the order or decision suffered from any mistake which could not have been known when the order was pronounced in open court in the presence of botli the parties in the present proceedings. Mr. Viswanatha Sastri, for the appellants, argues that this view is obviously wrong and should be reversed. In support of his argument, the learned counsel has invited our attention to the fact that, when the appeal was pending before the appellate tribunal, a statement had been filed by the TheJ''i. tlh appellants showing that the provision for income- Mee4,~ • tax had . to be r~vise~ in view of the. findings ~ecorded Their w! knt0 by the industrial tribunal. According to this state- -.. - · 1 ment, no surplus was available for payment of bonus Gajew!
f~(IT • to workmen even on the assumption that the findings recorded by the tribunal were correct. The appellants pointed out in this statepient that if an amount of Rs. 4,43,927 was disallowed by way of depreciation that would necessarily add to the amount of gross profits and. in consequence the provision for income- . tax would have to be proportionately increased. The appellants' case was that instead of Rs. 1, 75,000 which had been allowed by the industrial tribunal by way of provision for income-tax, it would be necessary to allow an amount of Rs. 4,75,582 in that behalf. The appellants' grievance is that though this statement was filed before the appellate tribunal, the appellate tribunal has not considered it at all. On the other hand, it appellrs from the judgment of the appellate tribunal that this point was not raised by the appellants before it in their arguments. No grievance was made and no higher amount was claimed by them to be reserved for taxation.
The appellate tribunal has also observed that the point raised by the appellants in their review petition did not show that any new and important matter had been discovered which, after the exercise of due diligence; would not have been discovered by the parties at the · time of the hearing of the appeal. Besides, the appellate tribunal also held that there was no mistake apparent on the face of the record. Technically there· may be some force in the observa-tions made by the appellate tribunal; but we cannot overlook the fact that a written statement had been filed before the appellate tribunal expressly and specifically raising . this point. That is why we pro-pose to deal with the merits of the argument' and not tQ reject it on the ground that this argument had not been urged at the proper siage. . On the merits,"the argument is that, if out of the total amount of RS. 8,43,927 debited -by the appellant$ to depreciation, an amount of Rs.
4,43,927 is disallowed, that must inevitably add to the total amount Mills, of gross profits and if the total amount of gross profits is increased, logically provision for a higher amount of income-tax must be made, Thus presented the J. argument . is simple and at first blush appears to be ·attractive; but the difficulty in accepting the argument is that the total amount of gross profits determined by Industrial Tribunals in these proceedings is not and cannot necessarily be the taxable gross profits of the employer. We have already observed that in determining the trading profits of the employer in such disputes, the method adopted by the industrial tribunals does not conform to all the requirements and provisions of the Income-tax Act, and so it would be fallacious to assume that the gross profits determined by the industrial tribunal should be taken to be gross profits that would be necessarily taxable under the Income-tax Act.
Besides, it would be relevant to remember that the provision for taxation in question has been made by the appellants themselves and presumably it is based on the appellant's anticipation as to how much approximately they will have to pay by way of income-tax. But, apart from this consideration, there can be no doubt that the appellants would get exemption from the payment of income-tax in respect of the amounts of initial and additional depreciation also as shown in their books of accounts. That is a right which has been conferred on the appellants by the relevant provisions of s. 10 of the Income-tax Act; and the benefit which the appellants are entitled to get under the said section cannot be ignored in deciding whether or not the provision of the sum of Rs. 1,75,000 for taxation purposes is adequate or not.
We think it is not open to the appellants to contend that though for the amounts covered by the normal and additional depreciations they would not be required to pay income-tax, nevertheless they should be allowed to provide for the payment of income-tax . in respect of these two items merely on the ground that they are disallowed by the industrial triburlal and have thus added to the total of gross profits as determined by the tribunal. The adequacy or otherwise of the provision for income-tax must necessarily be judged in the light of the Income-tax Act since it is under the Meenakshl said Act that the liability to pay tax would ultimately be determined.
Besides, if the appellants' argument Their is accepted and an amount notionally payable by way GaJendragadkar of income-tax in respect of disallowed items of depreciation is added to the estimated amount of income-tax provided by the appellants, the very object of disallowing the two items of depreciation would be substantially defeated. On the other hand, the rejec-tion of the appellants' argument would not mean any hardship because the additional amount sought to be added by them in the provision for income-tax would definitely not have to be paid by them. We are, therefore, satisfied that the grievance made by the appellants against the order passed by the appellate tribunal on the ground that it suffers from a mistake apparent on the face of the record is not well-founded. It would now be necessary to refer briefly to the decisions of industrial courts to which our attention has been drawn by the learned counsel for the appellants. In Model Mills, etc. Textile. Mills, Nagpur v.
· Rashtriya Mills Mazdoor Sangh(1 ), the implications of the Full Bench formula for ascel,'tainment of bonus have been explained. It is observed that "the formula did not purport to direct what a concern should do or should not do with its own moneys. In evolving the formula the rights and liabilities of the parties inter se in notional satisfaction of their legitimate claims as two co-operating units in the venture were tried to be equated. Opinions might differ as to the weightage to be attached to the various components constituting the formula. But the formula has to be taken as a whole in order that ~n equitable balance between the rights of capital and labour might be achieved for the ascertainment of bonus. " It may incidentally be pointed out that this deci· sion recognizes that income-tax calculated on the trading profits for the year must be deducted as a (I) (1955) I. L. L.
J, 534, prior charge from the profits even though exemption under the Income-tax Act is granted for the year in MIU•, question taking into consideration the past year's JJorkm•• losses. The . same view has been expressed by the appellate tribunal in Mahalaxmi Woollen Mills Ltd. v. a4k,,,-J. Their Workmen('). In this case, it has been held that "even if a concern is allowed exemption from the levy of income-tax because of prior losses or unabsorbed depreciation, etc. , tl! at by itself is no ground - for preventing the concern from claiming the amount of income-tax it would have been liable to pay if the profits made in the relevant year alone had been taken into account. Hence, in calculating the amount of available surplus, the amount of income-tax payable for that trading year is to be deducted irrespec-tive of the fact whether the company in fact pays tax for the year or not". Similarly in Bennett Coleman and Company, Ltd. v.
Their Workmen('), the Labour Appellate Tribunal has held that "unabsorbed depreciation and loss iJ;i. curred during prior years are allowed under s. 24(2) of the Income-tax Act to be adjusted against the profits of a future year. Where the company claims either to adjust this amount against gross profits or to deduct such amount of income-tax as would be payable on the profits lf the said two items are not to be adjusted, labour cannot be permitted to refuse relief resting on unabsorbed loss and depreciation and, at the same time try to get benefit for itself by refusing provision for tax resting on those very items. which are permitted to be adjusted by the income-tax authorities which will result in reduced income-tax or no tax at all. " It would thus appear from the decisions cited before us that indus-tl'ial tribunals have cxinsistently taken the view that in REME COUR. '.
r 'REPORTS S93 facie it may be said ·that, if the essential basis for deciding the workmen's claim for bonus in a given year is tho existence of the net surplus available for Meenakshi that year, it may not be permissiole . to question the propriety for the provision for income. tax made by the employer solely on the ground that in view of his previous year's losses he may not be called upon to pay G - income-tax during the year in question. After a;en all, in this connection the calculations are made by reference to the financial position of the employer during the particular year only and in _these_ calcula- . tions considerations relevant under the Income-tax Act in regard to the financial losses of the employer in the previous year would not be allowed to enter. However, in the present appeals we are not called upon to consider the correctness of the view taken by the Appellate Tribunal in these cases and so we need not pursue the matter any further. Mr.
Viswanatha Sastri has strongly relied on two labour decisions reported in B. E. S. T. TV orkers' Union v. Bombay Suburban Electric Supply Ltd. (•), and Greaves Cotton and Crompton Parkinson, Ltd. v. Its TVorkmen ('). These two decisions no doubt support the appellants' arguments before us but, for the reasons which we have already given, we must hold that these decisions are not sound or correct. The last case to which our attention has been drawn by :r. Ir. Viswanatha Sastri is the decision of the Labour Appellate Tribunal in_ Bengal Chemical &: Pharma- 3 ceutical Works, Ltd. v. Their Workmen ( ). This case decides that "in providing for income-tax the . tax payable by the. concern on its income earned in the year for which bonus is claimed must be ascertained. The amount of. income-tax actually paid during the year which is the tax of the income of the previous year should not be taken into account.
" In this case, the tribunal has observed that "for the purpose of ascertaining the income-tax which may be payable -by the employer for the year in question, the figures (1) (1957) 2 L. L. J. II2. (2) (1956) IL. L. J. 486. • (J) (1954-55) 6 F. J. R. 590. 1957 figures appearing on the expenditure. side of the profit The sree and loss account of that year have to be marshalled Meenakshi Mills, and examined. " This case is not of much help in decid- L~~- ing the point with which we are concerned. Their Workmen . ·'·· dk J In the result, the appeals fail on the merits and G a1e1~aga ar . b d' . d . h Th '! ] h mus~ e 1sm1sse wit costs. ere w1 , owever, be one set of costs in all these appeals. Appeals Dismissed.
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