Full Judgment Text
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PETITIONER:
SHRI AMBICA MILLS LTD. NO. 1
Vs.
RESPONDENT:
THE TEXTILE LABOUR ASSOCIATION, AHMEDABAD,, AND VICE VERSA
DATE OF JUDGMENT20/12/1972
BENCH:
ALAGIRISWAMI, A.
BENCH:
ALAGIRISWAMI, A.
DUA, I.D.
VAIDYIALINGAM, C.A.
CITATION:
1973 AIR 1081 1973 SCR (3) 123
1973 SCC (3) 787
ACT:
Payment of Bonus Act 1965, Second Schedule Item 6(g)
-Allowable deductions under-Subsidy’ meaning of-Cash
payments by way of assistance are subsidy-Indirect
assistance like Customs Drawback and relate on Railway
Freight is not ’Subsidy’-Subsidy to be allowable under Item
6(g) must be by Govt. body or Body Corporate established by
any law for the time being in force-Distinction between Body
Corporate established ’by’ law and ’under’ under law-Payment
received for earlier year must be deemed to be income of
year of receipt especially where accounts maintained on cash
basis.
HEADNOTE:
There was a dispute between the appellant mills and their
workmen as to the bonus payable for the year 1967. The
dispute was referred to the Industrial Court, Gujarat under
s. 73-A of the Bombay industrial Relations Act. 1946. The
workmen claimed inter alia that bonus should be paid at the
rate of 6.59% of the annual earnings. The Mills on the
other had contended that bonus was payable only at the
minimum rate of 4%. The Mills in calculating the available
surplus claimed deductions of certain items falling under
item 6(g) of the Second Schedule of the Payment of Bonus Act
1965, as subsidies. The dispute centred round the meaning
of the word ’subsidy’ in item 6(g) of the Second Schedule to
the Payment of Bonus Act. Another incidental question was
whether the Joint Plant Committee or the, Indian Cotton
Mills Federation was a ’Body Corporate established by any
law for the time being in force’.
HELD : (i) The Industrial Court was right in holding (a)
that the word Subsidy’ cannot be confined only to those
cases where cash payment is made by Government in order that
an industry may survive, (b) that even if assistance is
given by way of an incentive it would not cease to be a
subsidy provided it is a cash payment given by way of
assistance and (c) that certain types of assistance
particularly those Which are only indirect like rebates etc.
should be excluded. [127D]
Whether the grant is made to a single establishment or it is
granted on certain terms which make it available to all
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persons and establishments carrying on the same industry
does not make any difference in,; principle. The subsidy is
received by the concern or establishment carrying on that
industry or activity. [129E-F]
In view of the clear provision in item 6(g) for subsidy
being deducted it was not open to the Court to consider
whether it was proper to deduct the subsidy from the
allocable surplus. But the word ’Subsidy’ should be
restricted to the narrowest possible limits and should take
in, only, direct cash subsidies as contemplated under item
6(g). It cannot cover indirect assistance like Customs
Drawback or rebate on railway freights. [13OA-C]
The mere fact that the full excise duty and railway freight
is paid’ in the first instance and part of it is later
refunded should not make
123
124
any difference to the ultimate fact that what is paid by the
management is A ,only concessional excise duty and
concessional freight. [130F]
Sona Valley Portland Cement Co. v. The Workmen, [1972]
L.L.J., 642 and Bengal Textiles Association v. I.T. Commr.
1960 A.I.R. 1320, referred to.
Accordingly, while item I claimed by the appellant Mills
i.e. the subsidy paid by the Government should be deemed to
be a permissible deduction, items 3 & 4 were not permissible
deductions.
(ii) (a) The Joint Plant Committee is certainly not a
Government Body. It seems to be more or less functioning on
an informal basis. It does not seem to have any statutory
powers. The decision of the Industrial Court that the cash
paid by the Body is a deductible item could not be upheld.
Item 2 claimed by the appellant Mills was therefore not a
permissible deduction. [133C-D]
(b)Item 5 claimed by the Company was also not an allowable
,deduction because the Indian Cotton Mills Federation which
made the ,cash payment in this case was not a Body Corporate
established by any law for the time being in force. The
contention that the words ’body corporate established by any
law’ should be deemed to include even a body corporate
established under any law i.e. even a company, could ,not be
accepted. [133G]
Majoar Sahkari Bank Ltd. v. M. N. Jujumdar & Anr. 1955 2
L.L.J. 755 applied.
(iii)The amount of Rs. 6873 due for the year 1966 but
received (under item 1) in 1967 should also be deemed to be
income for the year 1967.
Consolidated Coffee Estate Ltd. v. Workmen, 1970 2 L.L.J.
576 relied on.
JUDGMENT:
CIVIL APPELLATE JURISDICTION : Civil Appeal Nos. 2083 and
2084 of 1969.
Appeals by special leave from the Award Part-I dated August
13, 1969 of the Industrial Court, Gujarat in Ref. (IC) No.
110 .,of 1968.
Civil Appeal Nos. 1259 and 1260 of 1970.
Appeals by special leave from the Award Part 11 dated August
28, 30, 1969 of the Industrial Court Gujarat Ahmedabad in
Ref. (IC) No. 110 of 1968.
S.-V. Gupte, Bhuoanesh Kumari, O. C. Mathur-, J. B. Dada-
chanii and Ravinder Narain for the appellant. (in C.As. Nos.
2083 & 2084/69) & for respondent (in C.As. Nos. 1259 & 1260 of 70
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).
V.M. Tarkunde, K. L. Hathi and P. C. Kapur for the
respondent (in C.As. Nos. 2083 & 2084/69) & for the
appellant (in C.As. Nos. 1269 & 1260/70).
The Judgment of the Court was delivered by
ALAGIRISWAMI, J. Civil appeals Nos. 2083 and 2084 of 1969
are by the Management, Shri Ambica Mills Ltd No. 1, against
the Award Part I dated 13th August, 1969 and Part II dated
28th August, 1969, respectively of the Industrial Court,
Gujarat in Reference IC No. 110 of 1968. Civil appeals Nos.
125
1259 and 1260 of 1970 are by the Textile Labour
Association,. Ahmedabad, representing the workmen against
the same award.
Shri Ambica Mills Ltd., Ahmedabad, is a public limited
company owning three textile units, viz., Shri Ambica Mills
Ltd. No. 1 and No. 2 at Ahmedabad, Shri Ambica Mills Ltd.
No. 3 at Baroda and two engineering units, viz., Shri Ambica
Tubes at Vata, and Shri Ambica Machinery Manufacturers in
the premises of Shri Ambica Mills Ltd. No. 1 at Ahmedabad.
The last unit, i.e., Ambica Machinery Manufacturers came
into existence in the beginning of the year 1967. Shri
Ambica Mills Ltd. 2 and 3 have entered into an agreement to
pay bonus on the lines of Shri Ambica Mills Ltd. No. 1,
Ahmedabad. All the aforesaid undertakings have been treated
as parts of the same establishment, namely, Shri Ambica
Mills Ltd., for the purpose of computation of bonus.
The dispute relates to the payment of bonus for the year
1967. The demand for the payment of bonus for the year 1967
was raised as a result of notice of change given by the
Textile Labour Association (hereinafter referred to as the
Association) on 15-7-1968. The appellant mills did not
agree to the payment of bonus as demanded and conciliation
proceedings having failed, the dispute was referred under
Section 73-A of the Bombay Industrial Relations Act, 1946.
The Association requested the Mills Company to furnish the
information regarding the computation of gross profits as
well as allocable surplus to enable the Association to
calculate the bonus for the year 1967. The Mills Company
supplied the said information, but it also claimed certain
deductions from the gross profit for calculating the
allocable surplus.
In the statement of claim filed by the Association it was
submitted that-
(a)The Mills Company should be directed to pay bonus at
the rate of 6.59% of the annual earnings.
(b)The said amount should be directed to be paid with
interest at the prevailing rate.
(c)The Honble Court may be pleased to grant any other
further relief as it may deem fit.
The deductions claimed by the in calculating the available
surplus were of certain items falling under item 6(g) of
the Second Schedule of the payment of Bonus Act, 1965, as
subsidies. it was contended that only 4% bonus i.e., the
minimum bonus was payable.
126
The Association accepted the facts and figures furnished by
the Mills Company and the dispute only related to the matter
of deduction in respect of an amount of Rs. 32,42,945/- and
whether the whole or any part thereof was subsidy or not.
The amounts claimed as subsidies consisted of the
following .Eve different items :--
(1) Rs. 8,63,194/-
Cash subsidy on export of steel pipes and tubes received
from Joint Chief Controller of Imports and Exports, Bombay.
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(2) Rs. 4,25,233/-
Cash by way of steel entitlement received from the Joint
Plant Committee, Calcutta.
(3) Rs. 9,33,213/-
Cash by way of Customs Drawback realisation on certain types
of pipes received from the Collector of Customs, Bombay.
(4) Rs. 71,754/-
Cash by way of Railway Freight Rebate paid by the Chief
Commercial Superintendent, Western Railway, Bombay.
(5) Rs. 9,49,551/-
Export incentive on the cotton textile goods exported
received from the Indian cotton Mills Federation, Bombay.
Out of this total amount, an amount of Irs. 9,72,986/- re-
lates to past years i.e., the year 1965 and 1966, and,
according to the Mills Company that cannot, in any event, be
treated as income for the accounting year 1967 to which the
dispute relates.
The Industrial Court held that the Mills Company was en-
titled to deduct the first two items i.e., cash assistance
from Jt. Chief Controller of Imports & Exports, Bombay,
being Rs. 8,63.194 and cash payment by way of steel
entitlement being Rs. 4,25,233 but not items Nos. 3, 4 and
5. It further directed the parties to’ file fresh
calculation on the basis of its directions in Award Part 1.
On the basis of the above directions the Association filed
the ,calculations reserving its right to appeal. The Mills
Company also submitted fresh calculations. Based on these
calculations the Industrial Court made an award directing
the Mills Company
127
to pay 4.53% of wages as bonus to all its employees in the 3
textile units and 2 engineering units.
The dispute ’thus centres round the meaning of the word
’Subsidy’ found in item 6(g) of the Second Schedule to the
Payment of Bonus Act. Another incidental question is
whether the Joint Plant Committee or the Indian Cotton Mills
Federation is a "Body Corporate established by any law for
the time being in force".
The word ’Subsidy’ is not defined in the Act. The
Industrial Court took into consideration the meanings of the
word ’Subsidy’ given in the (i) Webster’s New World
Dictionary, 1962, (ii) Shorter Oxford English Dictionary,
Vol. 11, Third Edition, (iii) Chambers Twentieth Century
Dictionary, Revised Edition, and (iv) The Reader’s Digest
Great Encyclopaedia Dictionary, Vol. 11 (M-Z), and came to
the conclusion that the word ’subsidy’ cannot be confined
only to those cases where cash payment is made by Government
in order that an industry may survive, that even if
assistance is given by way of an incentive it would not
cease to be a subsidy provided it is a cash payment given by
way of assistance and that certain types of assistance
particularly those which are only indirect like rebates etc.
should be excluded.
We find ourselves in agreement with this view. The various
definitions given in the dictionaries in so far as they are
relevant, are as follows :
Webster’s New World Dictionary, 1962
".....a grant of money, specifically (a) ... (b) a:
government grant to a private enterprise considered of
benefit to the public."
Shorter Oxford English Dictionary
"Help, aid, assistance N. Financial aid furnished by a state
or a public corporation in furthering of an undertaking or
the upkeep of a thing. . . . "
Chambers Twentieth Century Dictionary, Revised Edn.
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"Assistance and in money ... a I grant of public money in
aid of some enterprise, industry etc., or to keep down the
price of a commodity. . . "
The Reader’s Digest Great Encyclopaedic Dictionary, Vol. II
(M-Z)
"2. Financial aid given by government towards expenses of an
undertaking or institution held to
128
be of public utility; money paid by government to producers
of a commodity so that it can be sold to consumers at a low
price "
In addition our attention has been drawn to the definition
given in ’Words and Phrases, Permanent Edition, Col. 40"
where subsidy is described as follows :
"A subsidy is a grant of funds or property from a government
as of the state or municipal corporation to a private person
or company to assist to the establishment or support of an
enterprise deemed advantageous to the public; a subvention."
Reference is made to 60 Corpus Juris.
Corpus Juris Secundum, Vol. 83, page 760 gives the following
under the heading of Subsidy :
"Something, usually money, donated or given or appropriated
by the government through its proper agencies; a grant of
funds or property from a government, as of the state or, a
municipal corporation, to a private person or company to
assist in the establishment or support of an enterprise
deemed advantageous to the public; a subvention.
Pecuniary premiums offered by the government to persons
enlisting in the public service, or engaging in particular
industries, or performing specified services for the public
benefit are treated in Bounties."
The emphasis in every one of these definitions is on
something given or donated; indirect assistance is not
mentioned.
Before we proceed further, it may be necessary to refer to
the history regarding the place of "subsidy" in the payment
of bonus. Under what is known as the "Full Bench" formula,
subsidy will not be a proper deduction in calculating the
surplus available for payment of bonus. ’Mere is no reason
on principle why subsidies should be kept out of account in
calculating the available sum for payment of bonus. The
Bonus Commission in its report did not recommend subsidy as
a deductible item. Schedule 2 to the Bonus Act is really a
copy of the schedule found at page 30-40 of the Commission’s
report, with the single addition of item (g) after item 6(f)
found in the Commission’s report. Even the dissenting
minute to that report did not recommend that subsidy should
be a deductible item; but then the dissenting minute was on
a completely different basis from that of the main report.
129
After the report of the Commission, the legislation
regarding bonus took the form of a Bonus Ordinance where for
the first time we come across item 6(g) in Schedule 2. The
Resolution of the Government of India which considered the
recommendations of the Commission’s report and accepted it
subject to certain modifications, for the first time
referred to subsidies. The particular sentence is as
follows:
" (ii).................................. Further, subsidies
paid by Government to certain concern like the Hindustan
Shipyard should not be taken into account in
working out the gross profits for the purpose
of payment of bonus."
The Press Note issued by the Government regarding the Ordi-
nance also contained ’a similar statement. On the basis of
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these two statements and on the basis of an extract from
Kothari’s "Economic Guide and Investore Handbook of India’
where this subsidy to the Hindustan Ship Yard, which was
originally called the Scindia Steam Navigation Co has been
described, it had been argued before the Industrial Court,
and the same argument was repeated before this Court, that
the subsidy contemplated under item 6(g) can only be a
subsidy to a particular concern or establishment. We
consider this argument as fallacious. The reference to the
Hindustan Shipyard is merely illustrative. The argument
based on this that only grants to particular establishments
as such and not grants to any activity which any establish-
ment can carry on should be called a subsidy, is a far-
fetched one. Whether the grant is made to a single
establishment or it is granted on certain terms which make
it available to all persons or establishments carrying on
the same industry does not make any difference in principle.
The subsidy is received by the concern or establishment
carrying on that industry or activity.
On the other hand we realize the force of the argument
advanced on behalf of Labour that a grant, even a cash
subsidy, made in respect of the export of some commodity or
other, as in the present case, is related to the commodity
itself, towards the production of which both labour and
capital have contributed and, therefore, any part of the
income received in respect of that activity should not be
deducted in calculating the available surplus, and that it
would be unfair to labour to do so. The force of this
argument was appreciated and acceded to even by Shri Gupta
appearing on behalf of the Management. His sole point was
that but for the introduction of item 6(g) in the Second
Schedule to the Bonus Act it would not be open to him to
contend that subsidy should be deducted from the allocable
surplus for the purpose of payment of bonus. But he
contended, the Act itself having made the provision for
subsidy being deducted 10-63ISuPCI/73
130
it is not open to this Court to consider whether it was
proper to deduct the subsidy from the allocable surplus. He
argued that if subsidy should not be so deductible the
remedy lay elsewhere and that it was with the Legislature
and while it would be perfectly legitimate for this Court to
recommend that the deduction of subsidy should not be
permitted, the subsidy must be deducted as long as the
statute stands as it is. We appreciate the reasonableness
of the stand. But we consider that the word ’subsidy’
should be restricted to the narrowest possible limits and
should take in only direct cash subsidies as contemplated
under item 6(g). It cannot cover indirect assistance like
Customs Drawback or rebate on railway freight.
It was contended that an assistance is an assistance whether
it is direct or indirect and the drawback of Central Excise
and the rebate on railway freight are indirect assistance,
towards export, and they should also be deemed to be
subsidy. As pointed out earlier the overwhelming view of
the meaning of the term ’,subsidy" is direct payment and not
indirect assistance. Furthermore, if instead of ’allowing a
drawback in Central Excise and a rebate on railway freight
the scheme of assistance had been on the basis that goods
exported will pay only half the Central Excise Duty and half
the usual railway freight, this argument will not be
available to the Management. In that case there would have
been no repayment to the Management of part of the Central
Excise Duty and part of the railway freight paid by it and
it could not have been claimed as a cash receipt. The,
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whole of the Excise Duty and the railway freight originally
paid has been included as an item of expense, thus reducing
the surplus and when part of it is received back it does not
stand to reason that it should not go towards reduction of
the expenses and consequently increasing the surplus. The
mere fact that the full excise duty and railway freight is
paid in the first instance ;and part of it is later refunded
should not make any difference to the ultimate fact that
what is paid by the management is only concessional excise
duty and concessional railway freight and but for the mode
adopted of collecting the full excise duty and full railway
freight in the first instance and refunding part of it
later, neither the sums nor the argument would be available
to the management. We are, therefore, quite clear in our
mind that the drawback of Central Excise and rebate on
Railway freight should not be deemed to be a subsidy for the
purposes of this Act. The term subsidy cannot cover
concessional rates of excise duty and freight but only cash
payments.
We may, perhaps refer in this connection to certain
decisions relied on by the both sides. In Sone Valley
Portland Cement Co.
131
v The Workmen(1) this Court held that apart from legislation
an incentive bonus for increase of production, irrespective
of the question as to whether the industry was making profit
or not is one that must be introduced by the particular unit
of industry, and it would be for the management to fix what
incentives should be given to different departments to step
up production. It was further held that an Industrial
Tribunal would not be justified in holding that merely
because there has been augmentation in the production labour
would be entitled to make a claim to bonus because of such
increase, and that labour would undoubtedly be entitled to
revision of wage scales, dearness allowance and other terms
and conditions of service as also profit bonus. This deci-
sion is not, therefore. an authority for the proposition
that a subsidy intended to encourage export could not be
taken into account for the purpose of calculating the
allocable surplus. This decision itself proceeds on the
basis that in calculating the profit bonus such amounts
would have to be taken into account. All that was held was
that the amount paid as subsidy by itself could not be
considered to be one in which labour would be entitled to
share.
The decision of this Court in Bengal Textiles Association v.
I. T. Commr. 2 ) though it had to consider the meaning of
the word ’subsidy’ occurring in the Business Profits Tax Act
1947. would not be relevant for deciding the question at
issue. In that case it was held that the use of the word
’bonus’ or ’subsidy’ connotes that the payment is in the
nature of a gift, and as the payments in that case were made
by the Government to an association to assist it in carrying
on its business and for the services it was rendering to
Government, the payments were not in the nature of a gift.
This decision was relied on by Mr. Tarkunde as supporting
his argument that a payment made for a service rendered
cannot be deemed to be a subsidy. That is no doubt so, but
in the present case there is no question of any service ren-
dered by the management to :the Government. The mere fact
that the Government is interested in encouraging exports
and, therefore. offers many incentives for export, of which
any manufacturer could take advantage, does not mean that
any such manufacturer is rendering any service to
Government. These are schemes intended by the Government
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for the benefit of the country and. therefore. any person
would be entitled to take advantage of that scheme and be
entitled to subside or assistance promised by the
Government. Such payments do not become either payments for
service rendered or cease to be subsidy merely on the ground
that any number of persons coming under that category, would
be entitled to that benefit or payment.
(1) [1972] L.L.J. 612
(2) A.T.R. 1960 S.C. 1320.
132
It was argued by Mr. Tarkunde that if a manufacturer takes
it into his head to export all the products that he had
manufactured it would mean that all his receipts would be in
the form of subsidy, drawback on Central Excise and. rebate
on railway freight, and if all these items are to be
deducted from the profits there will be nothing available
for distribution as bonus and that it will be unfair to
labour to deprive it of its share of the income from
products towards the production of which it has made its own
contribution. Nationally that is possible but in actual
practice that is hardly likely. But it does not, however,
take away the force of the argument that the deduction of
subsidies from the total income would be unfair to labour in
the matter of payment of bonus. As we have already pointed
out the remedy lies with the Legislature. What prompted the
Government to include item 6(g) in the Second Schedule to
the Bonus Act we have no way of knowing.
We thus come to the conclusion that only direct cash pay-
ments should be deemed to be subsidies and not indirect
receipts in the form of drawn up of part of the Excise Duty
and rebate on railway freight, which are in reality not
subsidies but concessional rate of Excise Duty and railway
freight. This means that item 1, i.e., the subsidy paid
decree by the Government should be deemed to be a
permissible deduction but not items 3 and 4.
This leaves the question regarding items 2 and 5 for
consideration. Both these items are, of course, cases of
cash payment, but only if they are payments by the
Government or a Body Corporate established by any law for
the time being in force they would be permissible
deductions.
As regards the Joint Plant Committee the Industrial Court
merely said that it appears to be a Government Body, and at
another place that it appears to be a Body constituted by
the Government. A body constituted by the Government is not
necessarily a Government body. We find from the brochure
issued by the Joint Plant Committee regarding Indenting
Procedure and General Conditions of Sale for Iron and Steel,
that it was constituted by the Central Government in
exercise of the powers conferred by Clause 17 of the Iron
and Steel (Control) Order 1956 to take over the functions
previously performed by the Iron and Steel Controller in
regard to planning and distribution of indents and rolling
programmes. It consisted of Iron and Steel Controller as
Chairman and one representative of each of the main steel
plants, the Tata Iron & Steel Co. Ltd., the Indian Iron &
Steel Co. Ltd., Hindustan Steel Ltd., Rourkela, Hindustan
Steel Limited. Bhilai, Hindustan Steel Ltd., Durgapur, and
a representative of the Railway Ministry. This was the
result of the
133
decision to abolish over-all statutory control over the
prices of the bulk of steel production and the decision to
entrust freight equalisation to the Joint Plant Committee.
Clause 17 of the Iron and Steel (Control) Order 1956 is as
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follows :
"17. Pawer of Central Government to give directions. The
Central Government may give directions as to the procedure
to be followed by the authorities issuing quota
certificates, permits or written orders, referred to in
Clause 4 and 5. as to the maintenance by the Controller of
records in connection with the distribution of iron or steel
and generally for the purpose of giving effect to the
provisions of this part."
From these provisions it does not appear how exactly the
funds of the Joint Plant Committee are obtained and why or
how the Joint Plant Committee makes the payments of the kind
in question. This is certainly not a Government Body. It
seems to be more or less functioning on an informal basis.
It does not seem to have any statutory powers. The decision
of the Industrial Court that the cash paid by this Body is a
deductible items cannot, therefore, be upheld.
As regards the payment made by the Indian Cotton Mills
Federation, it appears that the payment is made out of a
fund collected by it at the rate of Rs. 200/- per bale of
imported cotton. It means, therefore, that when payments
are made out of this fund the mill receiving that payment is
in fact getting back either the whole or a substantial part
of what it has already paid, when it purchased imported
cotton. That apart, this Federation cannot be said to be a
Body Corporate established by any law for the time being in
force. It may be a Body Corporate established under the
Companies Act because it is registered under the Companies
Act. The Payment of Bonus Act, Section 2(9) defines a
company as follows :
"(9) ’company’ means any company as defined in section 3 of
the Companies Act, 1956, and includes a foreign company
within the meaning of sec. 591 of that Act;"
A corporation is defined in section 2 (11 ) as "any body
corporate established by or under any Central, Provisional
or State Act but does not include a company or a co-
operative society". Now it will be noticed that the
definition of the term ’corporation’ takes in bodies
corporate established by law as well as bodies corporate
established under any law. It cannot, therefore, be said
that ’when item 6(g) in the Second Schedule uses the words
’body corporate established by any law’ it was not conscious
of the distinction between a body corporate established by
law and a body corporate established under any law. This
distinction has also been
134
noticed in the decision of the High Court of Bombay in
Majoor Sahkari Bank Ltd. v. M. N. Majumdar & Anr.(1) tn.
discussing this question the learned Judes said
"But what, in our opinion , the notification contemplates is
not incorporation under any law but by, an, Indian law,
which means that A special law should incorporate the
particular company or association. For instance we have a
Reserve Bank of India; we had an Imperial Bank of India; we
have now State Banks. The Act itself incorporates the bank,
association or society. And the language used is clear. It
is not "incorporated under an Indian law"; it is
"incorporated by an Indian law". But what appears to us to
be fairly clear in the first part of the notification and
when we look at that it applies to the business of banking
companies registered under any of the enactments relating to
companies for the time being in force. Now the object
obviously was to apply this notification not to associations
of less *than 10 persons who were doing business of banking
and who could not be incorporated but to confine the
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operation of this notification to ten persons or more who
could be, and would have to be registered, either under the
Indian Companies Act or some other Act relating to
companies."
It was argued by Mr. Gupte that under the Act bonus is
payable by a "corporation" as well as a "company" and,
therefore, the words ’body corporate established by any law’
should be deemed to include even a body corporate
established under any law i.e., even a company. But it
appears to us that the words ’body corporate established by
any law’ have been deliberately used. While all companies
and corporations, as defined in the Act are liable to pay
bonus. the intention seems to be that only subsidies paid by
body corporate established by any law, should, be deductible
items and not subsidies paid by bodies corporate established
under any law. The above decision of the Bombay High Court
referred to the Reserve Bank of India, Imperial Bank of
India and State Banks. There are bodies corporate
established by law like the Rubber Board, Coffee Board etc.,
which grant subsidies for replantation, rehabilitation etc.
The idea apparently in referring to a body corporate
established by any law was that when bodies corporate are
established by any law for the,, specific purpose of
encouraging any industry and they grant subsidies, such
subsidies alone should be taken into account. We are of the
opinion. therefore. that item 5 also is not a deductible
item.
(1) [1955] 2 L.L.J. 755.
135
This leaves for decision the question whether the sum of
Rs. 9,72,986 which relates to amounts received in the year
1967 but relate to earlier years, can also be deducted or
not. In the view that we have taken that only item 1 is a
deductible item, the amount involved is a small one of Rs.
6,873 due for the year 1966 but received in the year 1967.
We are not able to agree with the contention on behalf of
labour that as the whole of the sum of Rs. 32.43 lacs has
been shown as item of income in the profit and loss account
of the mills the management cannot now contend that any part
of it cannot be deducted and that the whole of the amount
should be held to be profit available for calculating the
bonus. All that section 23 of the Act Provides is for pre-
sumption of the accuracies of the balance sheet and profits
and loss account of corporations and COmpanies. The
correctness has been accepted by both the parties. But
whether any part of that amount should be held to fall under
item 6 (g) of the Second Schedule to the Act cannot be
decided on the basis that it is shown as an income in the
profit and loss account or the balance sheet. There is no
question of estoppel here. All the same we have no doubt
that amounts due for earlier years received in 1967 should
also be deemed to be income for the year 1967. Otherwise it
means that such sums would not have been taken into account
in the years for which they were due as also in the years
when they were received. Moreover. the accounts in this
case have been maintained on a cash basis and, therefore,
the amounts received in the year 1967 should be deemed to be
the income of that year though due in respect of an earlier
year. We may also refer to the decision in Consolidated
Coffee Estate Ltd. v. Workmen(1) where it was held that even
though the company had been paving bonus in the past by
negotiating with its employees, if it insisted that for the
year in question it would pay in accordance with the
relevant law it could not be prevented from having its
liability for bonus determined accordingly.
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In the result the appeals of the Mills Company are
dismissed. The appeals of the Association are allowed in
part holding that item 2, i.e., the sums received from the
Joint Plant Committee is not a deductible item and item I
alone will be a deductible item under item 6(g) of the
Second Schedule. As the Association has succeeded in five
out of six questions that had to be decided they will get
their costs from the management. The Industrial Court will
have to re-calculate the bonus on this basis. One hearing
fee.
G. C.
(1) [1970] 2 L.L.J. 576.
136