WORKMEN versus MANAGEMENT OF SIJUA (JHERRIAH) ELECTRIC SUPPLY CO. LTD.

Citation: [1974] 1 S.C.R. 760 · Decided: 25-09-1973 · Supreme Court of India · Bench: P. JAGANMOHAN REDDY · Disposal: Case Partly allowed

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Judgment (excerpt)

760 
WORKMEN 
v. 
MANAGEMENT OF SIJUA (JHERRIAH) 
ELECTRIC SUPPLY .CO. LTD. 
September 25, 1973 
[P. JAGANMOHAN REDDY, S. N. DWIVEDI AND P. K. GOSWAMI, JJ.] 
Bonus Act-Three items, the rebate payable to consumers under Electricity 
Supply Act 1948, Development Rebate and Develop1n~nt Reserve under Income 
Tax Act 1961, whether to be deducted from profits for the 
purpose of ascer-
taining bonus. 
The dispute between the respondent company and the workmen arose in 
respect of the permissible additions and deductions to b~ made to the profits 
for the piirpose of ascertaining the bonus payable to the workmen under the 
provisions of the 'Bonus Act. 
The controversy between the Company and its 
\Vorkmen was in relation to three items mentioned in the profit and loss account 
which were also the ::;ubject ;natter of the reference. The first item related to 
a sun1 representing the rebate payable to the consumers under paragraph II ( 1) 
of the VJ Schedule to the Electricity Supply Act 1948. The second one related 
to a sum on account of Development Rebate under Income Tax Act 1961 and 
the third one related to a sum in respect of Development Reserve. The appel-
lants, however, challenged the first and the ~iro:i items before this Court. 
Partly allowing the appeal, 
HELD : (i) The computation and payment of bonus 
under the 
Bonus 
Act is provided on unit-wise basis in accordance with the formula laid down 
under the· Act. 
Jn the present case, the payment of bonus is related to the 
. profits of the year subject to the maximum bonus and the amount available by 
way of set-on. 
As the Company is not a Banking Company, the methOd of 
cori1putation of gross profits is laid down in the I[ Schedule of Bonus Act. 
S. 6 enumerates the deductions that have to be made out of the gross profits in 
order to arrive at the available surplus. 
The sums liable to be deducted from gross profits under Section 6 are : (a) 
Any amount by way of depreciation according to s. 32 ( 1) of the Income Tax 
Act or accordin.e: to the provisions of the Agricultural Income-T_ax law. 
(b > Any amount by waY of development rebate which the employer is en-
titled to deduct from his income. 
(c) Any direct tax which the employer is Jiabl~ to pay, and 
( 4) Sµch further sums as specified in respect of the employer in the 3rd 
Schedule etc. 
The appellants contended that rebate payable to the consumers cannot be 
deducted so as to reduce the net profit share in the profit and loss 
account. [764G-765G] 
(ii) AccordiJg to the workmen, a rebate payabie to the co?sumers of 
electricity cannot be deducted so as to reduce the net profit shown m the profit 
and loss account because entry 1 of the second Schedule to the Bonus Act is 
''not profit as µ·er profit and lo.ss accoun.t". Para. Il(l) of the VI-
Schedul~ to 
the Electricity Supply Act provides that if the clear profi~ ?f a ~1censee exceeds 
the amount of reasonable return, the excess hks to be d1VIded mto three equal 
portions and one portion has to be given as a rebate. t.o the 
consumers. If 
rebate iy given to the consumers in respect of the ~l~tnc1ty consumed by the.m, 
and for which payment has already. been made, 1t ~s. apparent that the wice 
of electricity which the consumers wdl pay a~t~r rece1v1ng the rebate, would be 
the actual price paid by them for the electr1c1ty consumed. Therefore, 
any 
-amount in the hands of the undertaking. liable to ~e returned to the consumers 
as rebate cannot b~ taken into account 10 computing. the gross pro1its of the 
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WORKMEN V. SIJUA ELECTRIC CO. 
761 
undertaking. 
Jt is only after deducting this amount that the actual revenue of 
~be undertaking could be computed. 
Therefore, the amount to ht: returned as 
rebate to the consumers is a d.eductible item. [766B] 
Poona Electric Supply Ltd. v. C./.T. Bombay, [1965] 3 S.C.R. 878 and 
Jabalpur Bijilighar KarJnachari Pa.'1.chayat v. J:1balpur Electric 
Supply 
Coin· 
pany Ltd. and 4.notlzer [1972] 1 S.C.R. 60, referred to. 
· 
(iii) :\s regards the sum of tlie development reserve 
which the 
work.n1en 
disputed, and which was deducted under item 6 of the Ill Schedule to the Bonus 
Act, it appears from the Affidavit filed in the High Court by the Company Iha\ 
the particulars of development reserve incurred in preceding 4 years 
inc_luded 
the year 1964-65. According to tho:: workmen, only a sum of Rs. 10,555,- being 
the proportionate development reserve c:Uculated on the developm

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