(I) S.C.H .. SUPltEME COURT REPORTS MYSOHE KIRLOSKAR LIMITED t'. WORKERS OF THE MYSORE KIRLOSKAR LIMITED (P. B. GAJENDRAGADKAR, A. K. SARKAR and K .. N. WANHOO, JJ.) Industrial Dispute-Bonus-Income Tax deductions-
Method of calculation-Working Capital-Return, if could include borrowed or deposit amount on whi-0h oompany was pay· ing interest -Rehabilitation-Evidence as to the prior charges not led, if could be led for subsequent dispute.
Held, that in consonance with the decision in the Assa:; ciated Companies Ltd's case the income-tax deduction n1ust be calculatfd on the amount which represents the balance after deducting the full statutory depreciation allowed from the gross profit.
Held, further that the rate allowed for return on work- ing capital is to 2 to 4% which is at the discretion of the Tribunal and the Supreme Court usually will not interfere with the discretion exercised by the Tribunal in a particular case. Held, further that for the purpose of returns on work-
ing capital, the working capital cannot include a sum which was either borrowed or was in deposit with the company on which the company was paying interest. The company can• not claim further interest on the borrowed amount which
has been used as -working capital, for it has already paid interest on it to those from whom it was qorrowed and this has been taken into account as expense in arriving at the gross profit. Where borrowed money is used as working capital
there is no question of giving any further return on this borrowed money. The return on reserves used as working capital can only be given on moneys belonging to the com• pany which are used as working capital.
Held, also, that where there is a dispute with regard to the claim for bonus by the workmen for a particular year and the fact that no evidence as to rehabilitation was led in · that particular year will ·not preclude the compiµiy froJD leading evideni:e as to the amount which should be allowed to it as prior charges on account of rehabilitation, in any subsequent dispute as to bonus relating to subsequent years • . 1'/ie Associated Cement Companies Ltd. v. 118 Workmen,
(1959] S.C.R, 925, followed. November 15. JJGJ Mrsort KirlOJkM Lid. v. H'orkm of the Mysor1 A"irlu1kar Lid. JViv1Choo J. Crvrr. APPELLAn: JURISDICTION : Civil Appeal No. 233 of 1960.
Appeal by special leave from the award dated September 29, 1958, of the Industrial Tribu- nal, Mysore, in Reference (LT.) No. 21 of 1957. iV/, C. Setalvad, Att-Orney-General for India,
S. L. Nara.~imha Murthy and J. N. Shroff, for the appellant. Junardan Sharma, for rc8pondent No. 1. 1961. November 15. The Judgment of the Court was delivered by WANCHOO, J.-Thisis an appeal by special leave
in an industrial matter. There was a. dispute between the appellant and its workmen as to bonus for the year 11154-55. This dispute waa referred by the Govorn- meµt of My11ore under the Industrial Disputes Act
No. XIV of 1947) to a tribunal for adjudioation. A number of objections were raised by the appellant before the tribunal; but we are not concerned with them, as the law with respect to profit bonus
has been settled by this Court in the Asaociated Cement Companies Ltd. v. Its workmen(1 ). The only point.II urged on behalf of the appellant by the learned Attorney-General are with respect to the
amount of inoome-tax, return on working capital and provision for rehabilitation in connection with tho calculations made by the tribunal. We shall therefore confine ourselves to the three points which
have been raised before us on behalf of the appellant. The tribunal allowed Rs. 1.67 laos for iucome- tax. The contention of the appellant is that this is incorrect in view of the decision of this Court in
the .daaociated Cement Compniea Ltd.(') It appears that the gross profits of the appellant wore Rs.9.46 lacs, while the full statutory depreciation allowed to the appellant for the year in dispute was Re. 4.30
lacs. Thus income-tax should have been deduoted 1. [19.Y.IJ s.c.R.s2s. ..a… (l) S.C.R. SlJPH.EME COURT REPORTS '377 on the sum of Rs. 5.16 lacs at seven annas in the rupee, which was the rate prevalent in the relevant
year. This amount comes to Its. 2.25 lacks. The contention of the appellant in this behalf is in our opinion correct and the calculation made by the tribunal will hiive to be modified accordingly.
The next question is about return on working capital. The dispute is both as to the rate of return and the amount on which it should be allo· wed. The tribunal has allowed three per cent on
working capital. The appellant contends that the tribunal should have allowed four per cent. As was pointed out in the Associated Cement Companies' oose(1) the rate allowed by tribunals on working capital is
between two to four per cent. In the present case the tribuna.1 has allowed three per cent. We do not think that there is any reason for us to inter. fore with the discretion of the tribunal in this matter
though it is true that the recent trend of tribunals. is to allow four per cent return on. working capital. Turning now to the amount of working capital on which return should have been allowed,
the appellant originally claimed that the amout used as working capital was Rs. 43.85 lacs. Latter however, a revised statement was put in and the amount was reduced to Rs. 36. 70 lac11.· The tribunal
has however calculated the working capital used in the business as Rs. 7 .85 lacs. The main reason why the tribunal arrived at this figure was that it held that the amount in the depreciation
reserve could not be treated as reserve used as working capital on which a return was admis· sible. It therefore excluded out of consideration the entire a.mount in the depreciation reserve which
was Rs. 36.24 lacs in considering what sum had been used as working capital. This view of the tribunal is clearly incorrect in view of this Court's decision in The Tam Oil Milla Go. Ltd. v. Its Work·
men. ("} In that case it wa.s pointed out that- (1) [1959] S.C.R. 925. (2) [1960] 1 S.C.R. I. ~"-lysore Kirloskar Ltd. v. H'orkers of the M;ysore Kirloskar Ltd. Wanchoo J. I!ICl Al •·Jurt A"ir/osl·ar
ud. ff111At1J oj'1!1t .\fys01t J. ·;,/OJ!M /..Jd. Wmuhoo J, 378 SLTPREME COUltT REPORTS [1962] SUPP. ……, "a return is allowed on the reserves used as working capital on the ground that if these
reserves arc not used for this purpose, the concern would have to borrow mouoy and pay intor!'st on that. This being the basis on which a return on reserves used as working capital
is allowed, there is no reason why, if there is in fact money a vilable in the depreciation re- serve and if that money is artually used dur- ing the year as working capital a return should
not be ~llowed on such money also." The same view was taken by tllis Court in l'etlad Turkey Red /Jye Works Ltd. v. Dyes and ()hernical Workers' Unum('), where it was emphasised that the
balanoo-sheet did not by itself prove the fact of utilisation of reserve as working capital and the law required that sucha.n important fact as the utilisation of a portion of the reserve as working capital had to
be proved by the employer by evidence given on affidavit or otherwise and after giving an opportunity to the workmen to contest the correctness of such evi- dence by cross-examination. Therefore the tribunal
in this case was not right in excluding the amount in the depreciation reserve altogether from con- sideration on the ground that it was a re11erve for depreciation. Thie brings us to the question as- to what
amount was actually used as working capital out of the reserve in tho relevant year. On that point there was the evidence of Shri i\I. S. Vartak who was the Secretary of the Appellant company. That
evidence as to utilisation of the reserve a.a working ca.pit.al was accepted by the tribunal. The state- ment of Shri Vartak shows that the amount shown in the revised calculations as to the working capital
was actually used as working capital during the year. Thus, according to this statement, Rs. 36. 70 lacs were used as working capital and the appellant (I) l1960J 2 S.C.R. 906. (1) S.C.R. SUPREME COURT HEPOB!l'S
claims return on that amount. It may be accepted that the sum of Rs. 36. 70 lacs was used as working capital by the appellant during the year; but we are of opinion that the appellant is not entitled to a
return on this entire amount, for the reason that this amount includes a sum of Hs. 14.56 lacs which was either borrowed by the appellant or was in deposit with it, on which the ftppellant was pay-
ing interest. The appellant therefore cannot claim further interest on this borrowed amount which has been used as working capital, for it has already paid interest on it to those from whom it was borrowed
and this has been taken into account as expsnse in arriving at the groBB profits. As was pointed out in The Tata Oil Mills Oo.s' case ('), the basis for giving a return on reserves used as working capital
is that otherwise money would have to be borrowed for that purpose. Where borrowed money is used as working capital there is no question of giving any further rnturn on this borrowed money. The
return on reserves used at working capital can only be given on moneys .belonging to the company whioh are used as working capital. Therefore, though Rs. 36.70 lacs might have actually been
used as working capital in the relevant year, Rs. 14.56 lacs were borrowed money on which in- terest was paid. There is no question therefore of any further return on this amount as prior charge.
Thus the amount on which the appellant is entitled to the return on working capital as a prior charge is Rs. 36.70 lacs minus Rs. 14.56 lacs, i.e. Rs. 22. 14 lacs. The return on this amount at three per cent
comes to .66 lacs and the calculations made by the tribunal would have to be corrected accordingly. Turning now to the claim for rehabilitation it is enough to say that n0 evidence as to rehabilita-
tion waa led in this case. It may be that this was because the appellant expected that the claim it was making on other items of prior charges would be suffi. oient to resist the claim for further bonus besides one
(I) [1960] IS. C.R. I, 19$1 1l~yaore Kirloskar ltd. v. 1Vorktrs of Ifie Mysore A~irloskar Ltd. ivanchoo J. J.fy1t»t Kirloshlr lid. v. IVotkcrJ rif•~e MysMt J..'irlo1ht1 Lld! Wan<hoo J.
380 8UPH.EME C'OURT REPoR1'S (1962] SUPP. month's bonus already paid. Tho learned Attorney· General therefore submitted that the case might be remanded to enable the appellant to lead ovidance
on tho question of rehabilitation. Tho dispute re- lates to the year 1954-55 and we think it is too la.to now to make a remand in order to determine this question. We should however like to make it
clear that the fa.ct that no evidence as to rehabilita- tion wa.s led in this ye~r will not preclude the appel- lant from leading evidence as to the amount which should be allowed to it as prior charge on account
of reh9.bilitation, in any subsequent dispute as to -bonus relating to subsequent years. In the present case, however, it is not possible to allow any amount for rehabilitation as a prior charge.
The final calculations therefore after the correc- tions made by us a.re as below : In Lacs Gross Profits Rs. 9.46 Deduct-National norrual depreciation…… 3.32 Deduct-income-tax
Balanoe 6.14 2.25 Balance 3.89 Deduct-return on paid up capital 1.33 Balance 2.56 Deduct-return on working capital at 3% .66 Available l!lll'plus 1.90 The ave.ile.ble surplus therefore for this year
must bi: held to be Rs. 1.90 lacs roughly. One month's wages come to roughly Rs. ·64 lacs. It seems to till therefore that it will be _fair ~o a.ll?W ll months' wages as bonus for this year, which
would come to about Rs .. 96 lacs. The a.ppella.nt will get some rebate on that from the inoome·tax department. We are therefore of opinion that the workmen are entitled to an additional bonus
for half a month for this year. We therefore partly allow the appeal and reduce the additional bonus from one month to half a month. In the circumstances we order the parties to bear their own cost~.
Appeal allowed. BIDI, BIDI LEAVES' AND TOBACCO MERCHANTS ASSOCIATION v. THE STATE OF BOMBAY (P. B. GAJENDRAGADKAR, A. K. SARKAR, K. N. WANCHOO, K. C. DAs GUPTA and N. RAJAGOPALA AYYANGAR, JJ.)
Minimum Wages-Bidi industry-Nolificatlon fixing minimum wages, prescribi11g method for di.•carding of 'Chhat' bidis and payment therefore-If ultra vii-es-Doctrine of implied powers-Notification No. MIV A 1557 J dated June 11, 1948-Minimurn Wages Act, J.948(11 of 1948), ss.
2(k) 3, 5, 20 and 21. By s. 3 of the Minimum W;iges Act, 1948, the appro- priate Government is authorised to fix minimum rates of wages for employees in the Scheduled employments and
•· 5 lays down the procedure for fixing and revising such minimum wages. The State Government published a noti- fication dated June 11, 1958, fixing minimum rates of wages in respect of employments in bidi making in the Vidarhha
region. Clauses I and 2 of the notification prescribed the minimum rates district wise and provided for higher rates for making bidis known as •Hatl)akhun' in all the districts. Clauses 3 to 7 dealt with disputes between the employers
and the employees as to how bad bidis were to be discarded and in what proportion and as to the payment for such dis- carded bidis. The appellant contended that els. 3 to 7 of the notification were 'ltltra virea:
llel.d, that els. 3 to 7 of the Notification were outside the purview of the p~wers conferred upon the State Government illysort Kir/oakar Ltd, lt"orkers of lhe 1~1.Jsore Kirloskar Ltd.