MUIR MILLS CO., LTD. versus SUTI MILLS MAZDOOR UNION, KANPUR.

Citation: [1955] 1 S.C.R. 991 · Decided: 19-11-1954 · Supreme Court of India · Bench: MEHR CHAND MAHAJAN · Disposal: Appeal(s) allowed

Cited by 7 judgment(s) · see the full citation network in Lexace

Judgment (excerpt)

.. 
S.C.R. 
SUPREME COURT REPORTS 
991 
_part of the working or operational expenses of the com-
pany. It was an expenditure made for the purpose of 
:acquiring an appreciated capital asset which would no 
doubt by reason of the undertaking given by the lessor 
make the 
capital asset 
more 
profit 
yielding. 
The 
period of 5 years over which the payments were spread 
did not make any difference to the nature of the acquisi-
tion. 
It was none the less an acquisition of an advant-
age of an enduring nature which enured for the benefit 
of the whole of the business for the full period 
of the 
lease 
unless terminated 
by the lessor 
by notice as 
prescribed in the last part of the clause. 
This again 
was the acquisition of an asset or 
advantage 
of an 
enduring nature for the whole of the business and was 
of the na~ure of capital expenditure and thus was 
not 
an allowable deduction under section 10(2) (xv) of the 
Act. 
We are therefore of the opinion that the conclusion 
reached by the 
Income-tax authorities as well as the 
High Co_urt in regard to the nature of the 
payments 
was correct and the sums of Rs. 40,000 paid by the 
company to the lessors during 
the accounting 
years 
1944-45 and 
1945-46 were not 
allowable 
deductions 
under section 10(2) (xv) of the Act. 
The appeal therefore fails 
and 
must be dismissed 
with costs. 
Appeal dismissed . 
MUIR MILLS CO., LTD. 
"· 
SUTI MILLS MAZDOOR UNION, KANPUR. 
[MEHR CHAND MAHAJAN C.J., S. R. DAs, 
BHAGWATI and VENKATARAMA AYYAR JJ.] 
Bonus -Meaning of-Necessary conditions for 
the demand 
. thereof-Industrial claim-Principles for the 
grant of 
it-Social 
Justice-Meaning 
of-Industrial 
Tribunals-Whether 
Tribunal.< 
within the meaning of Art. 136 of the Constitution. 
The term bonus is applied to a cash payment made in addition 
to wages. 
It generally represents the cash incentive given condi-
tionally on certain standards of 
attendance and efficiency being 
attained. 
1954 
Assam Bengal 
Cement Co., Ltd. 
v. 
Commissioner of 
Income-tax, 
West Bengal. 
Bhagwati], 
1 954 
November 19. 
1954 
Muir 
Mills Co., Ltd. 
v. 
Suti .Mills 
Mazdoor 
Union, Kanpur. 
992 
SUPREME COURT REPORTS 
[1955] 
There are two conditions, which have to be satiRfied before a 
demand for bonus can be justified and they are, ( 1) when wages fall 
short of the living standard and (2) the industry makes huge pro· 
fits part of which are due to the ·contribution which the workmen 
make in increasing production, 
The den1and for bonus becomes an 
industrial claim when either or both these conditions are satisfied. 
The formula for the grant of bonus is as follows :-
As both labour and capital contribute to the earnings of the 
industrial concern, it is fair that labour should derive 
some bene-
fit~ if there is a surplus after 
meeting prior or necessary charges .. 
The first charges on gross profits are ( 1) provision for depreciation. 
(2) reserves for rehabilitation, (3) a return J.t 6 per cent. 
on the 
paid up capital and ( 4) a return on the working capital at a lesser 
rate than the return on paid up capital. The surplus that remained: 
after meeting the aforesaid deductions would be available for dis-
tribution as bonus. 
The claim for bonus can be made by the employees only if as. 
a result of the joint contribution of capital and labour the indus· 
trial concern has earned profits. 
If in any particular 
year 
the 
working of the industrial concern has 
resulted in loss there is no 
basis nor justification for a demand 
for 
bonus. 
Bonus 
is not a-
deferred wage. 
If it were so, it would necessarily rank for preced-
ence before 
divid~nds. 
The dividends can only be 
paid out of 
profits and unless and until profits are made no occasion or question 
can arise for 
distribution 
of any sum as 
bonus amongst the 
employees. 
Social justice is 
a very 
vague and indeterminate 
expression 
t-
and no clear-cut definition can be laid down which will cover aU 
the situations. 
The concept of social justice does not emanate frqm the fanci· 
ful notions of any particular adjudicator 
but must be founded on 
a more solid foundation. 
Industrial 
Tribunals are 
Tribunals within the 
meaning of 
Art. 136 and Art. 136 has vested in the Supreme Court exceptional 
and overriding power to interfere 
where it reaches 
the conclusion 
~ -~­
that a person has been 
dealt with arbitrarily or that a 
Court or 
Tribunal within the territory of India has not given a fair deal to 
a litigant. 
I

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