Case Note & Summary
The dispute arose from a claim by the appellant workers' union for three months' wages as bonus for the financial year ending September 1956 from the respondent electricity company. The matter was referred for industrial adjudication to the Industrial Court, Bombay. The respondent contended that if the Full Bench Formula evolved by the Labour Appellate Tribunal and approved by the Supreme Court in Associated Cement Companies Ltd. v. Its Workmen was applied, there would be no available surplus for bonus. The Industrial Court accepted the respondent's contention and rejected the claim by award dated August 13, 1959. The main issue before the Supreme Court was whether depreciation for computing available surplus should be calculated under the rules framed under the Indian Income-tax Act, 1922, or under the Seventh Schedule to the Electricity (Supply) Act, 1948. The appellant argued for the Electricity (Supply) Act method, while the respondent relied on the Income-tax rules, which yielded no surplus. The Supreme Court noted that in U.P. Electric Supply Company Ltd. v. Their Workmen, the Labour Appellate Tribunal had applied income-tax depreciation rules to electricity companies, and that decision was approved in Shree Meenakshi Mills Ltd. v. Their Workmen and Tinnevelly Tuticorin Electric Supply Co. v. Its Workmen. The Court held that the Electricity (Supply) Act provisions, including Section 57 and the Sixth and Seventh Schedules, were meant for a special purpose—fixing charges to consumers—and not for industrial adjudication. Injecting those provisions into the Full Bench Formula would destroy uniformity and create a separate class for electricity companies, which could lead to bonus being payable in identical situations where other industrial concerns would pay none. The Court also observed that income-tax rates provide quicker building up of depreciation funds, which is beneficial for public utility companies. Since the view taken in 1955 had been followed throughout the country for six years and the entire question of bonus was under reference to a high-powered commission, the Court declined to disturb it. As depreciation under Income-tax rules left no available surplus, the Court found it unnecessary to decide the remaining issues of contingencies reserve and income-tax deductions. The appeal was dismissed with no order as to costs.
Headnote
A) Industrial Dispute - Bonus - Full Bench Formula Depreciation for Electricity Companies - Indian Income-tax Act, 1922 (Rules) and Electricity (Supply) Act, 1948 (Section 57, Sixth and Seventh Schedules) - The main dispute was whether depreciation for computing available surplus under the Full Bench Formula should follow the Income-tax Act rules or the Seventh Schedule to the Electricity (Supply) Act, 1948. The court approved the consistent view that income-tax depreciation rules applied even to electricity companies, as the Electricity (Supply) Act provisions served a special purpose and applying them would disrupt uniformity and possibly require bonus in identical situations. Held that income-tax rules should be applied in preference to the Seventh Schedule to the Electricity (Supply) Act, 1948, leaving no surplus. (Paras Not mentioned) B) Industrial Dispute - Bonus - Contingencies Reserve and Income-Tax Prior Charges - Electricity (Supply) Act, 1948 and Indian Income-tax Act, 1922 - The Industrial Court allowed deductions for contingencies reserve and income-tax as prior charges contributing to no available surplus. The Supreme Court did not decide these two issues because the depreciation issue was determinative. Held appeal dismissed without expressing any opinion on the contingencies reserve and income-tax deductions. (Paras Not mentioned)
Issue of Consideration
Whether depreciation for computing available surplus under the Full Bench Formula should be calculated according to the Income-tax Act rules or the Seventh Schedule to the Electricity (Supply) Act, 1948; and consequently whether any bonus was payable
Final Decision
The appeal was dismissed. The Industrial Court was right in allowing depreciation in accordance with the rates prescribed under the Rules framed under the Income-tax Act. As a result, there was no available surplus from which bonus could be awarded. The Court found it unnecessary to decide the other two points relating to contingencies reserve and income-tax. No order as to costs.
Law Points
- Income-tax depreciation rules apply for Full Bench Formula even to electricity companies
- Electricity (Supply) Act provisions are for special purpose and do not govern industrial bonus adjudication
- uniformity in bonus formula across industrial concerns
- settled law not disturbed
