METAL BOX CO. OF INDIA LTD. versus THEIR WORKMEN

Citation: [1969] 1 S.C.R. 750 · Decided: 20-08-1968 · Supreme Court of India · Bench: J.M. SHELAT · Disposal: Disposed off

Cited by 2 judgment(s) · cites 5 · see the full citation network in Lexace

Judgment (excerpt)

• 
METAL BOX CO. OF INDIA LTD. 
v. 
THEIR WORKMEN 
August 20, 1968 
[J. M. SHELAT At<D C. A. YAlDlALlNGAM, JJ.j 
Bonus Act, 1965 ss. 4, 6, 7--Scope 
of-..Con1puta1io11 
of bonus--
Principles for deduction from 
/;l'O~S profit~; on 
uccuunt of deprecia1k>n, 
deve/op111cn1 rebate, and estinwtt.'d liability .for 
grotuity-1'reat~nt OJ 
interest on capira/ reserve attributable to revaluation of assets-Principks 
for deter1nining allowance for direct tcxes that employer ''i.r liable to pay". 
In a dispute between the appellant and it.; \!.'Ork.men relating to the 
computation of bonll~ under 1hc Payment df Bonus Act, 1965. the Com-
pany contended that the available surplus came to R•. 49.96 lakhs, mty 
per cent 
of which, namely, Rs. 29.98 laklt• was the alloeablc surplus. 
The employees di.•putcd 1he computation claiming that the Company !tad 
\\.Tongly reduced the gross profil~ and the available surplus and contended, 
inter a/ia, that certain amounts deducted on 
accounl 
oi provic;ions for 
gratuity and for doubtful debt' should be added hack: they challenged 
a dcc!.uction of interest on reserves on the ground that the capital reserve 
wa.~ artificially arrived at by a mere revaluation of the company's fixed 
assets as on April I, i 956; and also dispuled the figures of depreciation, 
development rebalc and direct taxes deducted by the company 
while 
\vorking out the available surplus. 
The Unions disputed the amount of Rs. 
28.82 lakhs worked out by 
the Company's auditors 
a.~ depreciation in accordance with the lncome-
tax Act, 1961 on the ground (I) that there was no evidence 
that 
the 
amount of depreciation came 10 Rs. 28.82 lakhs; and (2) that since the 
profit and Joss account mentioned R~. 23.48 lakhs as depreciation, 
the 
Company could only claim that ;1mount. 
In it• award the Tribunal alloW<d Rs. 23.48 laklt• instead of Rs. 28.82 
lak.hs claimed by the company as depreciation. 
Similarly it allowed only 
Rs. 7 lakhs inslead of Rs. 8.8 lakhs claimed by the company as develop-
ment rebate. 
The Tribunal held that the amount of Rs. 18.33 lakhs 
claimed under the hcJd of grc1tuitv wa'i not a reserYe but a provision and 
therefdrc. was not liable to be added hack, but it held 1hat the company 
could deduct only ahout Rs. 10 Jakhs as 
also 
Rs. 
l.31 
lakhs 
and 
Rs. 87.000/- actually paid durin~ the year to employees who retired 
during that year and added back 1he balance of Rs. 6 lakh• to the gross 
profits. 
Except for these amount~. the Trihunal accepted_ the rest of the 
company's comput.1tion. 
Both the Unions and the Company ohtaioed 
,pccial le.we and filed appeals challenging the correctness of the Tr;bti-
nal's ay.·ard. 
In their appeal it was al<>o contended by the Union~ that 
tho Trihunal had wrongly allowed a dcduc1jon of Rs. 145 lakhs as direct 
t<tXCS under sec. 6( c); all that the empJoyer could deduct was direct 
taxes which he "is liable to pay" for the accounting year in respect of 
''his income, profits and ~ains during that year", i.r •• the employ« 
~ 
entitled to deduct only his aclual tax liability. 
Such liability. therefore, 
has to he wdrkcd out in accordanee wi!h the provision~ of the Income>-tax 
Act and other relevant Act<> by first arriving at the actual taxable income, 
oaill.'I and profit• under tho<e Acts and then compute the u..,. at ral"'i, 
provided by them for that particular accounting year. 
A 
B 
c 
D 
E 
F 
G 
H 
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• 
I 
• 
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; 
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A 
B 
c 
D 
E 
F 
G 
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METAL BOX CO. V. WORKMEN 
75( 
HELD : The appellant company contentions on the questions of 
development rebate and the pro,isions for gratuity must be upheld; the 
amount of depreciation must be ascertained afresh by the Tribunal after 
giving the parties opportunity to lead such evidence as they desired. The 
workmen's appeal must be dismissed. 
(I) The depreciation deducted in the expenditure 
column in the 
Profit and Loss Account was the depreciation wdrked out under s. 205(2) 
of the Companies Act, but under. section 6 of the Bon~ Act, the _Com-
pany is entitled to deduct from its gross profits depreciation adm1ss1bJe 
under Section 32(1) of the Income-tax Act, i.e., such percentage on the 
written down value as may, in the case of each of the classes of assets, 
be prescribed. 
It was 1for this. reason that Rs. 23.48 lakhs were shown 
as depreciation in the Profit and Loss Account by the Company while in 
the computation for bonus the company claimed Rs. 
28.82 lakhs 
as 
depreciation. [755 H-756 

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