Judgment

WANCHOO, J. : This is an appeal by special leave against the award of the Industrial Tribunal, Bombay, in a dispute between the Anil Starch Products Ltd., Ahmedabad (hereinafter referred to as the company) and its workmen, in the matter of profit bonus for the year 1953. The dispute arose over the demand made by the workmen for payment of six months wages as bonus for that year. This dispute was referred to the Industrial Tribunal by the Government of Bombay by its order dated July 15, 1955. The company had already paid one month s month s basic wages as bonus to its workmen and the real dispute was thus only about the remaining bonus for five months.

2. The case of the workmen was that the company had made substantial profits during the year. The wages-cum-dearness allowance paid by the company was low and therefore, profit bonus at the rate of six months wages should be granted to fill the gap between the wages paid and living wage. The company on the other hand contended that it was giving high wages and had already paid one month s basic wage as profit bonus and there was no scope for further payment of bonus as the available surplus, according to the Full Bench formula did not justify it.

3. The main dispute before the Tribunal related to three items, namely -

(i) Depreciation, and how it should be calculated for the purposes of the Full Bench formula ?

(ii) Whether any return should be allowed on the money in the depreciation reserve fund used as working capital; and if so, what ?

(iii) What should be the amount to be provided for rehabilitation ?

4. The Industrial Tribunal took into account the total statutory depreciation even though this was against the decision of the Labour Appellate Tribunal in the U. P. Electricity Supply Co., Ltd. v. Their Workmen, 1955-2 Lab LJ 431 (LATI- Bom.). The Tribunal also disallowed any return on depreciation fund, even if any part of it has been used as working capital. Lastly, it reduced the amount claimed for rehabilitation from Rs. 5.16 lacs to Rs. 2 lacs. After making the relevant calculations on this basis it came to the conclusion that there was surplus available for giving bonus at the rate of two months basic wage. It may be mentioned that bonus at the rate of one month s basic wage works out at Rs. 18,000. The company thereupon applied for special leave to appeal which was granted; and that is how the matter has now come before us for decision.

5. The three points which were agitated before the Tribunal have also been raised before us. We shall first take the question of depreciation. This matter has been considered by us in Associated Cement Companies Ltd., Bombay v. Its Workmen, C. As. Nos. 459 and 460 of 1957 judgment in which is delivered today. In accordance with the decision in these appeals we are of opinion that depreciation should be allowed on the basis of what is called notional normal depreciation. Income-tax should be deducted on the basis of the amount payable, which means that the entire statutory depreciation has to be taken into account for purposes of income-tax. This is also the decision of this Court in Meenakshi Mills, Ltd., Madurai v. Commissioner of Income-tax, Madras, (1956) SCR 691. In the calculations that we are making in this appeal, this method is being followed.

6. We then come to the question whether any return should be allowed on depreciation reserve used as working capital. The Tribunal, in our opinion, was in error in not allowing any return on the depreciation reserve used as working capital. The reasons given by it for this view are, in our opinion, untenable and unsatisfactory. Method of accounting has nothing to do with the question whether a return should be allowed on depreciation reserve or such part of it as may have been actually available and used as working capital. We also cannot understand why if money is available in the depreciation reserve and has actually been used as working capital during the year, as explained in Tata O