Full Judgment Text
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PETITIONER:
THE AHMEDABAD MISCELLANEOUSINDUSTRIAL WORKERS’ UNION
Vs.
RESPONDENT:
THE AHMEDABAD ELECTRICITY CO. LTD.
DATE OF JUDGMENT:
28/07/1961
BENCH:
WANCHOO, K.N.
BENCH:
WANCHOO, K.N.
GUPTA, K.C. DAS
CITATION:
1962 AIR 1255 1962 SCR (2) 934
CITATOR INFO :
RF 1967 SC 691 (11)
RF 1969 SC 530 (3)
RF 1972 SC 70 (21,22,23)
R 1972 SC 330 (7)
ACT:
Bonus-Payable by electricity company-Depreciation-Mode of
calculation-Indian-Income-tax Act (11 of 1922), Rules-Sch.
VII-Electricity (Supply) Act, 1948 (54 of 1948).
HEADNOTE:
The respondent, which is an electricity company, contested
the claim of the appellant for three months’ wages as bonus
on the ground that if calculation was made on the Full Bench
Formula evolved by the Labour Appellate Tribunal and
approved by this Court in the Associated Cement Companies
Ltd. v. Its Workmen, (1959) S. C. R. 925, there would be no
surplus available to pay the bonus. The question which
arose for decision was whether depreciation should be calcu-
lated according to the provisions of Income-tax Act and the
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rules framed thereunder or in accordance with the provisions
of the Seventh Schedule to the Electricity (Supply) Act,
1948.
Held, that the Income-tax rules should be applied in
calculating depreciation under the Full Bench formula in
preference to the provisions of the Seventh Schedule to the
Electricity (Supply) Act, 1948 even in the cases of
electricity companies.
U.P. Electric Supply Company Ltd. v. Their Workmen (1955)
(2) L. L. J. 43 1, Shree Meenakshi Mills Ltd. v. The
Workmen, (1958) S.C.R. 878 and Tinnevelly Tuticorin Electric
Supply Co. v..Its Workmen, (1960) 3 S.C.R. 68, considered.
The Mill Owners Association v. Rashtriya Mill Mazdoor Sang,
Bombay, (1950) 2 L. L. J. 1247, referred to.
JUDGMENT:
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 479 of 1960.
Appeal by special leave from the Award dated August 13,
1959, of the Industrial Court Bombay in Ref. (f.C.) No. 159
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of 1957.
C.T. Daru, L. Udayarathnam and S.S. Shukla, for the
appellant,
D.Vimadalal, J. B. Dadachanji, Revinder Narain and O. C.
Mathur for the respondent.
1961. July 28. The Judgment of the Court was delivered by
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 Septem-
ber 1956. The appellant claimed that three months I 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
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by this Court in the Associated Cement Companies Ltd. v. Its
Workmen (1), 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 appel-
lant’s claim. The main dispute in the Industrial Court
centred on three points namely-
(i) whether depreciation should be cal-
culated according to the provisions of the
Income-tax Act and the rules framed thereunder
or in accordance with the provisions contained
in the Seventh Schedule to the Electricity
(Supply) Act, No. LIV of 1918
(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 that there was no available surplus
from which any bonus could be awarded. Hence this appeal by
special leave.
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.
(1) (1959) S.C.R. 925.
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What depreciation should be allowed in the case of
electricity companies came lip for consideration before the
Appellate Tribunal in 1955 in the case of U. P. Electric
Supply Company Ltd. v. Their Workmen (1), 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 (Supply) 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
depreciation as it was in keeping with the Full Bench
formula and was not likely to raise fresh problems. It
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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. The
U.P. Electric Supply Company’s case (1) came up for
consideration before this Court in The Shree Meenakshi Mills
Ltd. v. Their Workmen (2) 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 The Meenakshi Mill’s
case ( 2) 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 the
U. P. Electric Supply Company’s case (1) with respect to
depreciation and could not have been unaware of the fact
that the Appellate Tribunal had applied the income-tax rules
for purposes of depreciation to electricity companies in
preference
(1) (1955) 2 L. L. J. 431.
(2) (1958) S. C. R. 878.
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to the provisions of the Seventh Schedule to the Electricity
(Supply) Act.
Further in The Tinnevelly-Tutcorin Electric Supply Co. Ltd.
v. Its Workmen (1), this Court dealt with the case of an
electricity company directly. It had then occasion to
consider the U. P. Electric Supply Company’s case (2) again
and pointed out that that case decided two questions of law.
The first was in regard to the applicability of the Full
Bench formula to electricity companies, and the second was
with respect to the extent of statutory depreciation to be
allowed under the Full Bench Formula. It was pointed out
that the decision on the second point by which the income-
tax rules were applied for purposes of depreciation to
electricity companies with the exception of initial and
additional depreciation was approved by this Court in the
Meenakshi Mill’s case (3). It is again true that in the
Tinnevelly-Tuticorin Electric Supply Company’s case (1) the
question whether depreciation should be allowed in
accordance with the income-tax rules or under the Seventh
Schedule to the Electricity (Supply) Act for the purposes of
the Full Bench formula was not directly raised ; but in
effect the decision in the U. P. Electric Supply Company’s
case (2) where the Appellate Tribunal had applied the
income-tax rules of depreciation in preference to the
provisions of the Seventh Schedule to the’ Electricity
(Supply) Act, was approved. In the circumstances it seems
to us that it is not open to the appellant to raise the
question that the provisions of the Seventh Schedule to the
Electricity (Supply) Act should be applied for purposes of
calculating depreciation in preference to the income-tax
rates in working out the Full Bench formula.
(1) (1960) 3 S. C. R. 68. (2) (1955) 2 L.L.J. 431.
(3) (1958) S.C.R. 878. (4) (1960) 3 S.C.R.68.
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But, assuming that the question is still open because it was
never directly raised in this Court and specifically
decided, we are of opinion that the income-tax rules should
be applied in working out depreciation under the Full Bench
formula in preference to the provisions of the Seventh
Schedule to the Electricity (Supply) Act. It was pointed
out in Tinnvelly Tuticorin ElectriG Supply Co.’s case (1)
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that the provisions in the Electricity (Supply) Act
contained in s. 57 and the Sixth and Seventh Schedules to
the Act were for a special purpose, namely, to work out the
charges to be recovered from consumers for the supply of
electricity. It was also observed that the provisions of
the Electricity (Supply) Act and its Schedules were meant
for operation in the field covered by the Act and that the
principles of industrial adjudication were wholly different
and had to be worked out in their own way in the industrial
field. It seems to us therefore that in working, out
available surplus according to the Full Bench formula, the
same principle with respect to depreciation should be
applied in the case of electricity companies as in the case
of all other industrial concerns. As the Appellate
".Tribunal pointed out, the result in the long run would. be
the same, though there might be difference in some years.
Besides, in the formula when it was evolved in 1950 (see The
Mill-Owners’ Association v. The Rashtriya Mill Mazdoor Sangh
Bombay(2), the depreciation intended to be allowed was, as
provided in the rules under the Income-tax Act. The Appel-
late Tribunal pointed this out in the U. P. Electric, Supply
Compan’s case (3) and said the Full Bench formula allowed
depreciation according to incometax rates. It seems to us
therefore that in the field of industrial relations in
connection with which the Full Bench formula was evolved
(1) (1960) 3 S. C. R. 68. (2) (1930) 2 L. L. J. 1247.
(3) (1955) 2 L. L. J. 431.
940
it is proper that the formula should be worked out as it was
evolved without injecting into it the provisions contained
in the Seventh Schedule to the Electricity (Supply) Act.
This will work for ’uniformity in all industrial concerns ;
and as pointed out in the Associated Cement Companies’ case
"the formula had on the whole worked fairly satisfactorily
in a large number of industries all over the country, and
the claim for bonus should be decided by tribunals on the
basis of this formula without attempting to revise it". If
the provisions of the Seventh Schedule to. the Electricity
(Supply) Act which, as we have pointed out, were evolved for
a special purpose, were to be injected into this formula,
the result would be that electricity companies would stand
in a group by themselves when compared with other industrial
concerns, and the uniformity that the formula had achieved
in the matter of bonus would be destroyed. The consequence
then will be that in identical situations electricity
companies may have to pay bonus while other industrial
concerns to which income-tax rates of depreciation would be
applied may not have to do so. It seems to us that this is
not desirable, particularly when we remember that
electricity companies are public utility companies.
Another reason why we think that income-tax rates of
depreciation should be applied for the purposes of the Full
Bench formula in the case of electricity companies also is
that income-tax rates provide for a quicker building up of
the depreciation fund. This to our mind is all to the good
in the case of public utility companies like those providing
electricity so that they may be in a position to have funds
at their disposal in case of unforeseen difficulties
resulting in the necessity of replacing plant and machinery
earlier than what is provided under the Seventh Schedule to
the Electricity (Supply) Act.
(1) (1959) S. 0, R. 925.
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There is yet another reason which inclines us to approve the
view taken by the Appellate Tribunal in the U. P. Electric
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Supply’Company’s case (1). That case settled the law in
1955 and has since been followed throughout the country. We
feel that we should not disturb that decision, unless there
are good reasons for doing so and none I has been shown. If
anything, it appears to us that this is not the time to
disturb that decision which has now been followed throughout
the country for the last six years, for the whole question
of bonus is under reference to a high-powered commission
which ,",ill go into the matter afresh and will necessarily
consider the question of the revision of the Full Bench
formula. As this Court pointed out in the Associated Cement
Company’s case (2), the problem raised by the question of
the revision of the Full Bench formula is of such a
character that it could only be considered by a high-powered
commission. That is now being done and it seems to us in
the circumstances that we should not disturb the decision
arrived at by the Appellate Tribunal in the U. P. Electric
Supply Company’s case (1) on this question.
It follows therefore that the Industrial Court was right in
allowing depreciation in accordance with the rates
prescribed under the Rules framed under the Income-tax Act.
As we have already pointed out, if that is done, there will
be no available surplus in this case, from which bonus could
be awarded. In the circumstances we do not think it
necessary to decide the other two points relating to the
contingencies reserve and income-tax, which were raised
before the Industrial Court. The appeal fails and is hereby
dismissed. In the circumstances we pass no order as to
costs.
Appeal dismissed.
(1) (1955) 2 L.L.J. 431.
(2) (1959) S.C.R. 925.
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