http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 5  

said writ petitioner.  If so, it follows that the order of the High Court directing the State Government  to issue permission to the two writ  petitioners ignoring the above circumstances is clearly erroneous. From  what is stated above, the judgment of the  High  Court allowing Special Civil Application Nos. 420 and 421 of  1966 cannot be sustained. Coming  to  appeal No. 878 of 1968, the facts lie  within  a very  narrow  compass.   For the  year  1965-66,  the  third respondent in Special Civil Application d unambiguous provision.

HEADNOTE: Section 7 of the Bonus Act provides as to how the direct tax payable  by an employer is to be calculated for the  purpose of  computing  the available surplus.  Clause (e)  of  s.  7 enacts  that  no account shall be taken of any  ’rebate’  or ’relief’  or  deduction  in the payment of  any  direct  tax allowed  under any law for the time being in force  relating to direct taxes or under the relevant annual Finance Act for the development of any industry. in the case of an industrial company, which is not a company in  which public ,arc substantially interested, the  Finance Act. 1966 fixed the rate of income-tax at 55% on so much  of the  total  income as did not exceed Rs. ten lakhs,  on  the balance, if any, of the total income 60% and 65% in the case of any other ,company. In a dispute between its employees and the appellant,  which is  an industrial company the latter contended-that for  the purpose  of computing the available surplus it was  entitled to  deduct  direct tax at 65% and not 55% which was  only  a confessional levy amounting to a ’relief’ for the purpose of development.   The Tribunal accepted the contention  of  the appellant.   The  High Court allowed the  respondent’s  writ petition under Art. 227 of the Constitution holding that the company   being  an  industrial  company  could  not   claim deduction  at  a  rate higher than 55%  in  calculating  the available surplus. On  appeal it was contended that the 10% concession  in  the rate  was  given  to industrial companies  with  a  view  to promote  development of industry and as such must be  deemed to  be  a ’relief’ or ’rebate’ in be payment of  direct  tax contemplated by s. 7(e) of the Bonus Act.  Reliance for this had been placed on the speech of the Finance Minister on the budget for the year 1966-67. Dismissing the appeal, HELD  :  (1) The company being an  industrial  company  with total income not exceeding rupees ten lakhs the rate of  tax under   paragraph  1(A)(2)(i)  of  the  Finance  Act.   1966 applicable  to it was 55% and not 65% of the  total  income. [544H-545A] (2)  The  ’rebate  or relief’ in the payment of  any  direct tax, in order to fall within the purview of s. 7(e) of Bonus Act.  must be a rebate or relief "allowed under any law  for the  time being in force relating. to direct taxes or  under the  relevant  Finance  Act.  for  the  development  of  any industry"  which is one of the conditions to  be  satisfied. In the present case it did not satisfy this condition.   The Finance Act, 1966 did not say that this difference of 10% in the rate of tax applicable to an industrial company and  any other  company is to be deemed to be a rebate or relief  for the  development  of industry.  No, has it been  shown  that this  difference  in  the rates is allowed as  a  rebate  or relief under any other extant law relating to direct  taxes.

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 5  

[545F-H] 3  (a)  It  was not permissible to use  the  speech  of  the Finance  Minister  to  construe the clear  language  of  the statute. [545C-D] (b)  As  a  general principle of interpretation,  where  the words  of a statute are ,plain, precise and unambiguous  the intention  of  the Legislature has to be gathered  from  the language of the statute itself and no external evidence such as  Parliamentary debate-, Reports of the Committees of  the Legislature  or even the statement made by the  Minister  on the  introduction of a measure or by the framers of the  Act is  admissible to construe those words.  It is only where  a statute   is  not  exhaustive  or  where  its  language   is ambiguous, uncertain, clouded or susceptible of more  543 than one meaning or shades of meaning that external evidence as  to the evils. if any. which the statute was intended  to remedy. or of the circumstances which led to the passing  of the statute may be looked into for the purpose of ascertain- ing  the object which the Legislature had in view  in  using the words in question. [545D-F]

JUDGMENT: CIVIL APPELLATE JURISDICTION: Civil Appeal No. 2053 of 1971. Appeal by special leave from the Judgment & Order dated  the 8th  July,  1971  of the Bombay High  Court  in  S.C.A.  No. 1346/68. M.   C.  Bhandare,  P. H. Parekh and S.  Bhandare,  for  the appellant. The Judgment of the Court was delivered by SARKARIA,  J.-Whether the difference of 10 per cent  between an  Industrial  Company and other Companies in the  levy  of Income-tax  provided  in  the Finance Act,  1966  is  to  be construed  a  "rebate"  or "relief" in the  payment  of  any direct  tax,  for  the development of an  industry  for  the purposes of S. 7(e) of the Payment of Bonus Act, 1965,  (for short, the Bonus Act) is the short question that falls to be answered in this appeal by special leave. The  appellant is a Private Ltd.  Company.  it  manufactures automobile  ancillaries  and other goods in its  Factory  at Bombay.  It employs about 170 workmen.  The workmen demanded bonus for the year 1964-65.  Their demand was not met by the Company.   Conciliation proceedings before the  Conciliation Officer  having  failed, the dispute was  submitted  to  the Government  which by its Order, dated May 2,  1967  referred the same for adjudication to the Industrial Tribunal. One of the points mooted before the Tribunal was, whether in calculating the available surplus, the direct tax payable by the Company was deductible at the rate of 55 per cent or  65 per cent.  The case of the Mazdoor Saneh (Respondent No.  1) was  that the rate should be 55 per cent as the Company  was paying  the  tax at the rate As against  this,  the  Company contended  that it was entitled to deduct as per s. 7(e)  of the Bonus Act, direct tax at the normal rate of 65 per  cent and  not at 55 per cent which was only a  confessional  levy amounting to a "relief" for the purpose of development. The Tribunal accepted the contention of the Company.   After referring  to  the  speech of the Finance  Minister  on  the Budget of 196667, the Tribunal held:               assessed  to income tax at the rate of 65  per               cent, those engaged in industrial undertakings               have been assessed at the concessional rate of               55  per  cent,  as  a  measure  of   rendering

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 5  

             assistance to their growth.  Such a concession               would, unquestionably amount to relief for the               purpose  of  development  as  contemplated  by               Section 7(e) of the Act." Aggrieved, the Mazdoor Sangh impugned the Tribunal’s Award, dated 29-2-1968, by a Writ Petition under Article 227 of the Con- 544 stitution  before the High Court of Bombay.  The High  Court held  that  the  Company being an  Industrial  Company,  was liable to pay tax under the Finance Act, 1966 at the rate of 55%  only on its total income after deducting  depreciation. Therefore it could not claim deduction at a rate higher than 55%  in calculating the available surplus.  In  the  result, the High Court set aside the Award and remitted the case  to the  Tribunal for further disposal in accordance  with  law. Hence this appeal by the Company. Broadly, the scheme of the Bonus Act is this : At first, the gross  profits derived by an employer from an  establishment are  calculated  in  the  manner  specified  in  the   First Schedule,   or  the  Second  Schedule,  whichever   may   be applicable (s. 4).  On the basis of such gross profits,  the available  surplus  for the particular  accounting  year  is computed.   This  is done by deducting  therefrom  the  sums referred to in Section 6. According to Clause (c) of Section 6, one of the sums so deductible is:               "Subject  to the provisions of Section 7,  any               direct tax which the employer is liable to pay               for  the  accounting year in  respect  of  his               income, profits and gains during that year". Section 7, to which s. 6(c) is subject, provides how for the purposes of the Act, the direct tax payable by the  employer is  to be calculated.  Clause (e) of Section 7 is  material. It runs thus :               "no  account  shall  be taken  of  any  rebate               (other than development rebate or  development               allowance)  or credit or relief  or  deduction               (not hereinbefore mentioned in section) in the               payment  of any direct tax allowed  under  any               law  for the time being in force  relating  to               direct  taxes  or under  the  relevant  annual               Finance  Act,  for  the  development  of   any               industry". The   rates  of  income-tax  applicable  to   Private   Ltd. Companies  tinder Paragraph F, Part I of the First  Schedule fixed by the Finance Act, 1966, are as follows :               1.    In  the  case of a  domestic  Company(A)               (1)....               (2)   where  the Company is not a  company  in               which the public are substantially interested.               (i)   in the case of an industrial Company-               (1)   on  so much of the total income as  does               not exceed Rs. 10,00,000-55 per cent.               (2)   on  the  balance, if any  of  the  total               income-60 per cent.               (ii)  in  any other case--65 per cent  of  the               total income". It  is  not disputed that the Company  being  an  industrial Company  with  total  income  for  the  relevant  year,  not exceeding Rs. 10,00,900,,  545 the  rate  of  tax under the above Paragaph  1(A)  (2)  (i), applicable to it was 55 per cent and not 65 per cent of  the total  income.  However, Mr. Bhandare’s contention  is  that this  was only a concessional rate and not the  normal  rate

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 5  

which  was  prescribed  under  Clause  (ii)  of  the   above Paragraph 1(A) (2).  The point pressed into argument is that this  ten per cent concession in the tax-rate was  given  to Industrial  Companies with a view to promote development  of Industry  and, as such, must be deemed to be a  "relief"  or "rebate"   in  the  payment  of  direct  tax  of  the   kind contemplated by Section 7(e) of the Act.  Reliance for  this contention  has  been placed on the speech  of  the  Finance Minister  on the Budget of 1966-67, wherein he  proposed  to provide "certain reliefs" which he considered "necessary for providing  a  suitable  climate of  growth",  and,  in  that context,  described  the  rate  of  55%  tax  on  Industrial Companies as a "concessional rate". We  are afraid what the Finance Minister said in his  speech cannot  be  imported  into  this  case  and  used  for   the construction  of  Clause (e) of Section 7. The  language  of that provision is manifestly clear and unequivocal.  It  has to  be  construed  as  it stands,  according  to  its  plain grammatical sense without addition or deletion of any words. As a general principle of interpretation, where the words of a statute are plain, precise and unambiguous, the  intention of  the Legislature is to be gathered from the  language  of the  statute  itself  and  no  external  evidence  such   as Parliamentary  Debates,  Reports of the  Committees  of  the Legislature  or even the statement made by the  Minister  on the  introduction of a measure or by the framers of the  Act is  admissible to construe those words.  It is only where  a statute   is  not  exhaustive  or  where  its  language   is ambiguous,  uncertain, clouded or susceptible of  more  than one meaning or shades of meaning, that external evidence  as to  the  evils, if any, which the statute  was  intended  to remedy, or of the circumstances which led to the passing  of the statute may be looked into for the purpose of ascertain- ing  the object which the Legislature had in view  in  using the words in question. In  the  case  before us, the language of  Section  7(e)  is crystal   clear   and  self-contained.   It   indicates   in unmistakable  terms  that  the ’rebate  or  relief’  in  the payment  of  any  direct tax in order  to  fall  within  the purview  of this clause must satisfy two  conditions,  viz., (i)  that it must be a rebate or relief "allowed  under  any law for the time being in force relating to direct taxes  or under  the relevant annual Finance Act", and  further,  (ii) that  it must be a relief or rebate for the  development  of any  Industry.  In the present case, condition (i) is  lack- ing. The Finance Act, 1966, does not say that this difference  of 10per  cent in the rates of tax applicable to an  Industrial Company and any other Company is to be deemed to be a rebate or relief for the development of Industry.  Nor has it  been shown  that  this difference in the rates is  allowed  as  a rebate  or  relief under any other extant  law  relating  to direct taxes. 546 The High Court was, therefore, right in holding that it  was not  ,permissible to use the speech of the Finance  Minister to construe-the clear language of the statute,. For  the  forgoing  reasons  the  question  posed  above  is answered in the negative and the appeal is dismissed. As  regards  the costs, the delay in payment  of  the  bonus caused  by  the  pendency  of this  appeal  has  been  amply compensated vide this Court’s order dated February 17, 1972, which is to this effect "The  order  of  ex-parte  stay  is  made  absolute  on  the condition  that-  the  petitioner-appellant  shall  pay  six

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 5 of 5  

percent interest on any amount that is found payable by  the appellant to the respondent-workmen from the date the  award become  enforceable till the disposal of the appeal in  this Court, in case the appeal fails in this Court." The  appeal  has been heard ex-parte, we therefore  make  no order as to costs. P.B.R.                     Appeal dismissed. 547