LexWORKMEN OF NATIONAL & GRINDLAYS BANK LTD. versus THE NATIONAL & GRINDLAYS BANK LTD.
Open in Lexace · Ask the AI about this caseJudgment (excerpt)
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WORKMEN OF NATIONAL & GRINDLAYS BANK LTD.
v.
THE NATIONAL & GRINDLAYS BANK LTD.
January 16, 1976
[H. R. KHANNA .. P. N. BllAGWATI AND S. MURTAZA FAZAL ALI, JJ.]
Pr1y111e11t of Bonus Act, 1965-Foreign banking con1pa11y-Bo11us-Cornpu-
tt11ion of allocable surplus itr!111s to be taken into account-Depreciation-Cnti-
jictlfl is.Hied by l11coo1c Tax Officer-If posseses
cvidentiary
i·a!ue-Working
j'1111ds-Mea11i1u~ of.
As a result of negotiations between the respondent-Bank and its employees
(appellants) an industrial dispute with regard to bonus for the years 1956 to
J 964 was settled on an ad hoc basis.
By the time of the settlement however,
The Payment of Bonus Act, 1965 came into force.
In respect of the accounting
year 1964, though the bonus formula was applicable, no separate computation
\\·as n1ade in accordance with that formula since it was settled on an ad hoc
basis as a part of tin omnibus settlement.
The Hor.us Act provides a statutory formula for the con1putation of bonus.
Section 2(13) defines an 'employee' to mean 11ny person en1ployed on a salary
or \vage not exceeding one
thousand and six hundred
rupees per
menscm.
Section 4(a) provides that the gross profits shall be calculated in the matl!ler
specified in the First
Schedule.
ltem 2 of the
First
Schedule deals
with
"add back" in respect of (a) bonus to employees, (b) depreciation (c) develop-
ment rebate reserve and (d) any other reserves.
Item 3(a) deal-; with •·add
back" of bonus paid to employees in respect of previous accounting years. Item
6(e) deals with deduction in the case of foreign banking companies of propor-
tionate adn1inistrative (overhead) expenses of head office allocable to fndian
business. The concept of "available surplus" is defined ins. 2(6) to mean avai!-
able surplus computed under s. 5 and that section lays do\vn that the available
surplus in respect of any accounting year shall be the gross profit for that year
after deducting therefrom the sums referred to in s. 6 which, under clause (a)
include "any aniount by \\·ay of depreciation admissible in accordance \Vith the
provisions of s. 32( I) of the lncome Tax Act'' and under clause (d)
"~uch
further sums as are specified in re'>pcct of the employer in the Third Schedule.''
Clause (iv) of the proviso to item 2 of the Third Schedule provides that in the
case of a banking company any sum v.ihich, in respect of the accounting year,
is deposited by it with the Reserve Bank of India under s. 11 (2)(b)(ii) of the
B;:i.nking Regulation Act, 1949 not exceeding the amount required up.der this
provision to be so deposited shall be deducted from the gross profits as prior
charge.
Section 15 provides for what is liable to be carried forward for being
set on and set off out of allocable surrlus in the succeeding year or yenrs.
An induslrial dispute having arisen betv-1een the parties in regard to the
computation of bonus for the accounting year 1966. it \1{<lS referred to an
Industrial Tribunal for adjudication.
The Tribunal's award was assailed by the
\vorkmen on the following grounds : (a) that there was an excess of allocable
surplus over the amount of maximum bonus for the accounting years 1964 and
1965, which, by reason of s. 15(1 ), was liable to be carried forward f0r being
~ct on in the succeeding accounting year 1966;
(b) that \vhile the object of "add back" was that the entire affiount set apart
;is provision for bonus should be added back in determining the available sur-
plus. in spite of making a provision of a much larger amount as bonus. the
Bank had added back only a small amount representing the bonus of thosl)
\Vorkmen who were employees falling within the n1eaning of s. 2(13) and there-
by failed to take into account bonus in respect of those workmen who arc
not such employees: the \Von.I 'e-mployee' in items 2(a) of the First Schedule
\Vas not limited to employees as defined in s. 2(13) but was used, in a wider
sense to include all en1ployees, that is,
employees drawing more than
1600
rupees or less;
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WORKMEN V. GRINOLAYS BANK
13 1
( c) that the Tribunal was wrong in allowing the Bank to deduct a much
A
higher sum by way of depreciation
than \vas shown in the profit and loss
account, that the burden of showing wha't the amount of depreciation admissible
under s. 32( 1) of the Income Tax Act \\'.as, \Vas on the Bank which it had failed to
discharge and that, at aExcerpt shown. Read the full judgment & AI analysis in Lexace.