In calculating bonus for electricity companies under the Full Bench formula, depreciation should be calculated according to the Income-tax Act and the rules framed thereunder, and not according to the Seventh Schedule to the Electricity (Supply) Act, 1954.

Judgment

WANCHOO, J. : This is an appeal by special leave in an industrial matter. The appellant is the Ahmedabad Miscellaneous Industrial Workers Union, and the dispute which went for adjudication before the Industrial Court Bombay was with respect to bonus for the year ending September 1956. The appellant claimed that three months wages should be awarded as bonus by the respondent, which is the Ahmedabad Electricity Company Limited. The contention of the respondent was that if a calculation was made in accordance with the Full Bench formula evolved by the Labour Appellate Tribunal and approved by this Court in Associated Cement Companies Ltd. v. Workmen Employed, 1959 SCR 925 there would be no available surplus from which any bonus could be awarded. The Industrial Court accepted the contention of the respondent and rejected the appellant s claim. The main dispute in the Industrial Court centred on three points namely-

(i) whether depreciation should be calculated according to the provisions of the Income-ax Act and the rules framed thereunder or in accordance with the provisions contained in the Seventh Schedule to the Electricity (Supply) Act, No. LTV of 1954;

(ii) whether any deduction should be allowed as a prior charge towards contingencies reserve created under the Electricity (Supply) Act; and

(iii) whether any deduction should be allowed on account of income-tax.The Industrial Court held against the appellant on all the three points and found at there was no available surplus from which any bonus could be awarded. Hence this appeal by special leave.

2. It is not in dispute between the parties that if depreciation is calculated in accordance with the rules framed under the Income-tax Act, there will be no available surplus, from which bonus could be awarded. The main question therefore that arises in this appeal is whether depreciation should be calculated according to the Rules framed under the Income-tax Act or in accordance with the Seventh Schedule to the Electricity (Supply) Act, if this question is decided against the appellant, it would be unnecessary to decide the other two points on which the parties were at variance in the Industrial Court.

3. What depreciation should be allowed in the case of electricity companies came up for consideration before the Appellate Tribunal in 1955 in the case of U. P. Electric Supply Co., Ltd. v. Their Workmen, 1955-2 Lab LJ 431 (LATI-Bom) and it was pressed before it that in the case of electricity companies depreciation should be deducted in the manner specified in the Seventh Schedule to the Electricity (Suyply) Act. The Appellate Tribunal pointed out that in the long run the result of the application of the two methods would be the same; but it preferred to give as prior charge income-tax deprecation as it was in keeping with the Full Bench formula and was not likely to raise fresh problems. It appears that since then, as pointed out by the Industrial Court, various Industrial Tribunals have been allowing depreciation according to the income-tax rates and not according to the Seventh Schedule to the Electricity (Supply) Act in the case of electricity companies also. U.P. Electric Supply Company s case, 1955-2 Lab LJ 431 (LATI-Bom) came up for consideration before this Court in Shree Meenakshi Mills Ltd. v. Their Workmen, 1958 SCR 878 and was approved. This Court then approved the decision of the Appellate Tribunal disallowing initial and additional depreciation in calculating depreciation for purposes of the Full Bench formula but accepted that depreciation according to income-tax rates should be deducted. It is true that Meenakshi Mills case, 1958 SCR 878 was not dealing with an electricity company and this Court did not have occasion to consider the point directly; even so, this Court approved the decision in U. P. Electric Supply Company s case, 1955-2 Lab LJ 431 (LATI-Bom) with respect to depreciation and could not have been unaware of the fact that the Appellate Tribuna