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SUPREME COURT OF INDIA
G.K. MITTER, C.A. VAIDIALINGAM AND P. JAGANMOHAN REDDY, JJ.
The Delhi Cloth and General Mills Co. Ltd., Appellant
Versus
The Workmen and others, Respondents.
Civil Appeal No. 622 of 1967, D/- 3-9-1971.
Advocates appeared
M/s. G. B. Pai, D. R. Thadani and S. S. Sharma, Advocates, for Appellant; Mr. M. N. Phadke, Sr. Advocate, (M/s. S. S. Khanduja, V. P. Kohli and Miss Lalita Kohli, Advocates with him), (for Nos. 1 (c), 2 (a), (b) & (c); Mr. M. N. Phadke, Sr. Advocate, (M/s. D. K. Agarwal, A. K. Kumar and M. V. Goswami, Advocates, with him), (for Nos. 1 (e) and 3 (c) (i); Mr. M. K. Ramamurthi, Sr. Advocate, (Mr. Vineet Kumar, Advocate, with him), (for No. 1 (a)); and M/s. O. P. Sharma and K. S. Suri, Advocates (for No. 1 (b)), for Respondents.
Payment of Bonus Act of 1965 - Section 2 (4), 6, 8, 3, 4, 5, 101(1), 7, 7(b), (c), (d) and (e), 10, 6 (a) and (c) - Income-tax Act - Section 32 (1), (2), 84 - Finance Act, 1965 - Income-tax Act, 1961 - Section 28, 29, 30 to 43-A, 31, 32, 33, 33-B, 35, 35-A, 35-B, 35-C and 36 - Company - Separate Balance Sheets and Profit and Loss Accounts - Workmen Bonus - Whether in calculating bonus table for accounting year ending allocation separately made by Delhi Cloth and General Mills Co. Ltd. towards Capital and Reserves of Delhi Cloth Mills and Swatantra Bharat Mills, two units of Company is fair and reasonable - Whether workmen of these Mills are entitled to bonus at a rate higher than 6 per cent. of wages for accounting year ending - Held, Employer is to be treated as a separate juristic person liable to pay bonus to employees as if establishment was his only venture, no matter how he fares in his other ventures - Even if sum total of his activities in respect of his ventures resulted in a loss for accounting year, he would have to pay bonus subject to maximum specified in Section 10 of Act to each employee of establishment which was making profits - Profits or losses of other establishments, although they may form part of composite whole in accounting to be done under Companies Act or assessments to be made under Income-tax Act, would be wholly alien to consideration and computation of bonus of profit-making establishments in terms of Act - It was argued at one stage by respondents that cl. (c) of S. 6 is not related to cls. (a) and (b) of said section - If that were so, there is no reason why tax liability at 45% should not be calculated on whole of gross profits i.e. Rs. 156.09 lakhs - Ex. M-15 was apparently prepared on basis that total tax liability for income-tax purposes of all various units under ownership of the Delhi Cloth and General Mills Company Ltd. being Rs. 16 lakhs, Rs. 7.85 lakhs and Rs. 2.24 lakhs would be attributable to working results of Delhi Cloth Mills and Swatantra Bharat Mills - If direct tax liability be as quantified by Management in Ex. M-330 available surplus in terms of S. 5 of Act is Rs. 37.35 lakhs and allocable surplus under Act being 60% thereof is to be quantified at Rs. 23.40 lakhs which works out to 7.31 per cent on annual wage bills of all eligible employees totalling Rs. 306.32 lakhs - In present case it so happens that bulk of profits of company came from these two units some of other units suffered losses while still others were not equally profit-making - If argument raised on behalf of workmen was to be accepted and if it so happened that other units were greater profit-making branches than these two units, greater tax liability might fall on these units thereby reducing percentage of bonus due to employees of these units as a whole - In result, Court hold that direct taxes under Section 6 (c) of Act were properly quantified by appellants in their calculation shown in Ex. M-330 and Tribunal went wrong in assessing that liability on basis of Ex. M-15 - Award will therefore be set aside and modified to provide for bonus being given to workers at 7.31 per cent of their annual wage bill - Appeal allowed.
Judgment
MITTER J.: The only point of dispute between the parties to this appeal by special leave from an order of an Industrial Tribunal relates to the quantum of direct taxes deductible under S. 6 of the Payment of Bonus Act, 1965.
2. The appellant is a public limited company owning and running various industrial units situate at different places in India. These are engaged in the manufacture of different kinds of articles such as cotton textiles, artificial silk fabrics, sugar, industrial alcohol, vanaspati, chemicals, fertiliser, polyvinyl chloride and rayon tyrecord etc. Two of these units i.e. The Delhi Cloth Mills and the Swatantra Bharat Mills are cotton textile mills each registered as a factory under the Factories Act. The award under appeal relates to these two mills alone. The appellant prepares and publishes one consolidated balance sheet and profit and loss account of the company showing the final results of the working of all the units for its shareholders. It had however for many years past, prepared and maintained separate balance sheets and profit and loss accounts for some of its units individually and some grouped together. Although separate balance sheets and profit and loss accounts were prepared for each of these two mills (hereinafter referred to as D. C. M. and S. B. M. for abbreviation) their workmen have always been paid bonus calculated on the basis of pooled profits of the two units treating them as one unit. This is borne out by the award of the Tribunal in paragraph 29.
3. The reference herein was made by notification dated March 4, 1966 under Ss. 10 (1) (d) and 12 (5) of the Industrial Disputes Act for adjudication of several specified matters of which the first two read as follows:
"1. Whether in calculating the bonus table for the accounting year ending 30-6-1965 the allocation separately made by the Delhi Cloth and General Mills Co. Ltd. towards the Capital and Reserves of the Delhi Cloth Mills and Swatantra Bharat Mills, the two units of the Company is fair and reasonable? If not, what directions are necessary in this regard?
2. Whether the workmen of these Mills are entitled to bonus at a rate higher than 6 per cent. of the wages for the accounting year ending 30-6-1965? If so what directions are necessary in this regard?"
After prolonged proceedings before the Tribunal a settlement was arrived at between the Management and the Labour Unions which were parties to the reference and agreed directions given in accordance therewith in regard to issue No. 1 were as follows:
"1. Balance-sheets of D. C. M. and S. B. M. will be taken together for calculation of available surplus in accordance with the formula laid down in the Payment of Bonus Act, 1965.
2. Interest has been charged in the profit and loss account of D. C. M. and S. B. M. units of the head-office current account. Hence, no return will be claimed thereon.
3. Interest has not been charged on the fixed capital expenditure accounts and the gratuity reserves appearing in the balance sheets of the D. C. M. and S. B.M. therefore, return on such amounts will be claimed.
4. The following method will be followed in making a claim for return on the following amounts:
(a) The fixed capital expenditure account in the D. C. M. and S. B. M. as represented by the written down value of the fixed assets appearing in the balance-sheet of these two units will be treated as paid up share capital of the company allocated to and invested in these two units and return at the rate of 8 1/2% or as provided in the Payment of Bonus Act, 1965 from time to time will be charged thereon as provided under the Payment of Bonus Act, 1965.
b) The gratuity reserves of these two units will be treated as reserves and return at the rate of 8% will be charged thereon as provided under the Payment of Bonus Act, 1965.
5. The method and basis of casting balance-sheets will not be unilaterally altered or changed.
6. The above method of charging return on paid up share capital and reserve of
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