LexBAREILLY ELECTRICITY SUPPLY CO. LTD. versus THE WORKMEN & ORS.
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241
A
BAREILLY ELECTRICITY SUPPLY CO. LTD.
B
c
D
E
F
G
H
v.
THE WORKMEN & ORS.
August ~6, 1971
[G. K. MITTER AND P. JAGANMOHAN REDDY, JJ)
Industrial Dispute-Bonus-Available surplus-Full Bench
formula-Documents filed before Industrial Tribunal whether
require formal proof-Depreciation for double shift-Allow-
ances for income-tax, computation of-Return on working
capital-Amounts required for rehabilitation-Contingency
and Development reserves-Financial capacity.
The appellant was an electricity supply company. The dispute
between the appellant and its workmen relating to the bonus payable
for the year 1960-61 was referred to the Industrial Tribunal. The case
of the appellant was that after allowing for prior charges no available
surplus was left for the payment of bonus. The Tribunal however,
computed the
available surplus at Rs. 1,29,248 and out of this
awarded three months' bonus amounting to Rs. 730,00 to the workmen.
In appeal to this court it was contended on behalf of the appellant that
the Tribun~l was in error in disallowing (a) depreciation on account
of double shift, (b) income-tax,
(c) return on working capital,
(d) amounts required for rehabilitation, (e) contingency reserve and
(f) development reserve, the latter two of which were statutory reserves
which the undertaking had to provide under the schedule to the Electri-
city Supply Act 1948.
Inter alia the appellant contended that
since the Evidence Act as a whole was not applicable to industrial pro-
ceedings certain documents such as balance sheet should have been
accepted by the Tribunal without formal proof.
HELD: (i) In earlier cases decided by this Court in which the Fuli
Bench formula of the Labour Appellate Tribunal had been considered
by this Court with reference to Electricity Undertakings and other wise,
the following principles were laid down for the purpose of working
out the available surplus: (I) first gross profits have to be ascertained and
for that purpose balance-sheet and the profit and loss account as required
under the Companies Act have to be looked into. If the entries are
contested they have to be proved like any other contested fact; (2) The
relevant year for which bonus is claimed is a self sufficient unit and the
ap{lropriate accounts have to be made on the notional basis in respect
of ihe said year: (3) The ascertainment of depreciation is according to
the Income-tax Act and what is allowed as a prior charge is the annual
noiional normal depreciation and not the actual depreciation which
is in fact allowed.
Apart from the notional normal depreciation the
depreciation allowable under Tncome-tax Act for multiple shift is also
allowable; (4) In calculating the income·tax for deduction as a 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 include the
depreciation for multiple shifts, if any, and thereafter the income-tax
242
SUPREME COURT REPORTS
[1972] l S.C.R.
will have to be calculated; (5) Return on paid up capital allowable for
deduction from the gross profits is 6 ~-0
; a slightly higher percentage
may be allowed in risk undertakings like plantation>;
(b) In regard
to return on working capital, if it is shown that the reserves were available
and were actually used as working capital, whether the reserves utilised
were depreciation reserves or any other, a return from 2 % to 4 % is
allowable according to the industry, taking into consideration any special
circumstances which may justify a claim for a higher interest; (7) Reha-
bilitation reserve has to be provided for in order to keep the original
capital of the business intact. It is necessary in the interest of labour
as well as capital to provide for depreciation of the assets yearly and also
to provide for rise of prices.
For the determination of this reservo it
is suggested that the undertaking be first divided into blocks such
as 'plant and machinery' on the one hand and other assets like Road,
Buildings, Railways sidings etc. on the other.
Then the cost of these
separate blocks has to be ascertained and their probable
future life
has to be estimated. Once this estimate is made it becomes possible
to anticipate approximately the year when the plant or machinery will
require replacement; and it is the probable price of such replacement
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