SHRI AMBICA MILLS LTD. NO. 1 versus THE TEXTILE LABOUR ASSOCIATION, AHMEDABAD, AND VICE VERSA

Citation: [1973] 3 S.C.R. 123 · Decided: 20-12-1972 · Supreme Court of India · Bench: C.A. VAIDYIALINGAM · Disposal: Disposed off

Judgment (excerpt)

A 
B 
c 
D 
E 
F 
G 
H 
SHRI AMBICA MILLS LTD. NO. 1 
v. 
THE TEXTILE LABOUR ASSOCIATION, AHMEDABAD, 
AND VICE VERSA 
December 20, 1972 
[A. ALAGIRISWAMI, l. D. DUA AND C. A. VAIDIALINGAM, JJ.] 
Payment of Bonus Act 1965, Second Schedule Item 6(g)-Al/owable 
ded11ctions under-'Subsidy' meaning of-Cash payments 
by 
way 
of 
a.fsistance are subsidy-Indirect assistance like Customs Drawb~k and 
re/;.te on Railway Freight is not 'Subsidy'-Subsidy to be allowable undtr 
Item 6(g) must be by Govt. body or Body Corporate established by 
any la1v for the time being in force-Distinction between Body Corporal~ 
established 'by' law and 'under' under law-Payment received for earlier· 
year nutst be deemed to be income of year of receipt especially 
when 
accounts n1aintained on cc.sh basis. 
There was a dispute between the appellant mills and their workme;n-
as to the bonus payable for the year 1967. The dispute was referred to 
the Industrial Court, Gujarat under s. 73-A of the Bombay Industrial 
Relations Act, 1946. The workmen claimed inter alia that bonus should 
be paid at tbe rate of 6. 59% of the annual earnings. The Mills on 
the other ha;nd contended that bonus was payable only at the minimum 
rate of 4%. The Mills in calculating the available 
surplus 
claimed: 
deductions of certain items falling under item 6(g) of the_ Second Sche-
dule of the Payment of Bonus Act 1965, as 
subsidies. The 
dispute 
centred 
round the meaning of the word 
'subsidy' 
in 
item 6(g) 
of the Second 
Schedule 
to 
the Payment of B®us Act. 
Another 
incidental 
question 
was whether the Joint Plant Committee or the· 
Indian Cotton Mills Federation was a 'Body Corporate established by 
any Jaw for the time being in force'. 
HELD : (i) The Industrial Court was right in holdi:ng (a) that the· 
\.vord 'Subsidy' cannot be confined only to 
those 
cases 
where 
cash1 
payment is made by Government in order that an industry may survive, 
{b) that e\'en if assistance is given by wav of an i:ncentive it wou¥ 
not cease to be a subsidy provided it is a cash payment given by way 
of assistance and (c) that certain types of assistance particularly those' 
which are onlv indirect like rebates etc, should be excluded. 
[1270] 
Whether the grant is made to a single establishment or it is gramed· 
on certain terms which make it available to all persons and establish-
ments carrying on the same industry does not make any difference in. 
principle. 
The subsidv is received bv the 
concern 
or 
establishment. 
carrying 0'.1 that industry or activity. [129:&F] 
!n view of the clear provision in item 6(g) for subsidy being deduct·· 
ed 1t v:as not open to the Court to consider whether it was proper to· 
deduct the sub~id\
1 from the allocable ~u'rolus. But the word 'Subsidy' 
should be restncted to the narrowest possible limits and should take in· 
only d~rcc.t cash s_ubsidies . as conte~plated under item 6(g). It cannot 
cover indirect assistance hke Customs Drawback or rebate on railway 
freights. 
[l30A-C] 
The mere fact that the full excise dutv and railway freight is paid: 
in the first instance and part of it is later refunded shoul.d not make: 
123 
124 
SUPREME COURT REPORTS 
[1973] 3 S.C.R. 
.any difference to the ultimate fact that what is paid by 'the management is 
only concessional excise duty and concessional freight. 
[I 30F) 
Sona Valley Portland Cement Co. v. The Workmen, (19721 L.L.J. 
642 and Bengal Textiles Association v. I.T. Commr. 1960 A.LR. 1320, 
:referred to. 
Accordingly, while item 1 claimed by the appellant Mills I.e. the 
subsidy paid by the Government should be deemed to b,e a permissible 
deduction, items 3 & 4 were not permissible deductions. 
(ii) (a) The Joint Plant Committee is certainly not a Government 
Body. 
It seems to be more or less functioning c;>n 
'1!I1' informal basis. 
It does not seem to have any statutory powers. 
The decision of the 
Industrial Court that the cash paid by the Body is a deductible 
item 
could not be upheld. 
Item 2 claimed by the appellant Mills was there-
fore not a permissible deduction. 
[133C-D] 
(b) Item 5 claimed by the Company was also not 
an 
allowable 
deduction because the Lndian Cotton Mills Federation which made the 
cash payment in this case was not a Body Corporate established by any 
law for the time being in force. 
The contention that the words 'body 
·corporate established by any law' should be deemed to include even a 
body corporate established under any law i.e. e¥en a c

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