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

PETITIONER: VOLTAS LIMITED

       Vs.

RESPONDENT: ITS WORKMEN

DATE OF JUDGMENT: 09/12/1960

BENCH: WANCHOO, K.N. BENCH: WANCHOO, K.N. GAJENDRAGADKAR, P.B. GUPTA, K.C. DAS

CITATION:  1961 AIR  941            1961 SCR  (3) 167  CITATOR INFO :  D          1962 SC1258  (2,3)  D          1968 SC 963  (41)  R          1973 SC2394  (14)

ACT: Industrial Dispute-Bonus-Contribution to Political fund,  if can  be deducted from gross profit-Extraneous  income-Nature of-- Salesmen and apprentices, if entitled to bonus.

HEADNOTE: The  question  in this appeal was whether the  Tribunal  was wrong  in not allowing the amount paid to a  political  fund which  was  permissible  as  an  item  of  expense  and  for disallowing  the claim for deduction of certain  amounts  as extraneous  income and whether the salesmen and  apprentices were entitled to bonus. 168 Held,  that though the law or the rules of the company  per- mitted the employer to pay amounts as donations to political funds,  it  was  not a proper expense to  be  deducted  when working  out the available surplus in the light of the  Full Bench formula. Held,  further, that neither the profits  from  transactions which were carried out in the normal course of business, nor the commission earned on transactions entered directly  with foreign  manufacturers, where the workmen had  serviced  the goods and did other work which brought such business to  the employer, could be allowed as extraneous income. Held,  also that the salesmen who were given  commission  on sales  had  already  taken a share in  the  profits  of  the company  on a fair basis and there was no justification  for granting them further bonus out of the available surplus  of profits. That  the apprentices hardly contributed to the  profits  of the company.  Thus they were not entitled to any bonus. The  Associated  Cement  Companies Ltd.  v.  Their  Workmen, [1959]  S.C.R.  925 and The Tata Oil Mills Co. Ltd.  v.  Its Workmen and Ors., [1960] 1 S.C.R. 1, applied.

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

JUDGMENT: CIVIL  APPELLATE, JURISDICTION: Civil Appeals Nos.  153  and 154 of 1960. Appeals  by  special  leave from the  Award  dated  February 5,1959,  of  the Industrial Tribunal, Bombay,  in  Reference (I.T.) No. 212 of 1958. S.D.  Vimadalal, S. N. Andley and J. B.  Dadachanji,  for the appellant in C. A. No. 153/60 and Respondent in C.A. No. 154/60. M.C.  Setalvad, Attorney-General for India  and  Janardan Sharma,  for  the  respondents  in  C.A.  No.  153/  60  and Appellants in C.A. No. 154/60. 1960.   December 9. The Judgment of the Court was  delivered by WANCHOO, J.-The only question raised in these two appeals by special  leave is about the quantum of bonus to be  paid  to the  workmen (hereinafter called the respondents) by  Voltas Limited (hereinafter called the appellant) for the financial year 1956-57.  The dispute between the parties was  referred to the adjudication of the industrial tribunal Bombay.   The appellant, it appears, had already paid 4 1/2 months’  basic wages  as  bonus for the relevant year but  the  respondents claimed it at the rate of six months’ basic wages subject to the minimum of Rs. 250 per employee.                             169 The  tribunal  went into the figures and  after  making  the relevant  calculations  came  to  the  conclusion  that  the available  surplus  worked out according to  the  Full-Bench formula  justified the grant of bonus equal to five  months’ basic  salary; it therefore ordered payment of  this  amount excluding  the  amount already paid.  The appellant  in  its appeal claims that the tribunal should have allowed  nothing more   than  what  the  appellant  had  already  paid;   the respondents  in  their appeal on the other hand  claim  that they should have been allowed six months’ bonus. The  principles  on which bonus has to  be  calculated  have already been decided by this Court in the Associated  Cement Companies  Ltd. v. Their Workmen (1) and the  only  question that arises for our consideration is whether the tribunal in making  its calculations has acted in accordance with  those principles.   This leads us to the consideration of  various points  raised  on behalf of the parties to  show  that  the tribunal had not acted in all particulars in accordance with the decision in the Associated Cement Companies’ case (1). We  shall  first  take the points raised on  behalf  of  the appellant.  The first point raised is that the tribunal  was wrong  in  not  allowing a sum of rupees  one  lac  paid  as contribution to political fund as an item of expense.  It is urged  that  this  is  a permissible  item  of  expense  and therefore  the  tribunal should not have added  it  back  in arriving  at the gross profits.  We are of opinion that  the tribunal   was  right  in  not  allowing  this   amount   as expenditure.   In effect this payment is no  different  from any amount given in charity by an employer, and though  such payment  may  be justified in the sense that it may  not  be against  the  Articles  of Association of a  company  it  is nonetheless  an expense which need not be incurred  for  the business of the company.  Besides, though in this particular case the donation considering the circumstances of the  case was not much, it is possible that permissible donations  may be out of all proportion and may thus result in reducing the available (1)  [1059] 2 S.C.R. 925. 22 170

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

surplus  from which low paid workmen are entitled to  bonus. We are therefore of opinion that though the law or the rules of the company may permit the appellant to pay such  amounts as  donations  to  political funds, this  is  not  a  proper expense  to  be  deducted when  working  out  the  available surplus  in  the  light  of the  Full  Bench  formula.   The tribunal’s decision therefore on this point must be upheld. The second contention of the appellant relates to  deduction of  what it calls extraneous income.  This matter  has  been considered  by this Court in The Tata Oil Mills Co. Ltd.  v. Ite  Workmen  and  Others (1) and what we  have  to  see  is whether  in accordance with the decision in that  case,  the appellant’s   claim   for  deducting  certain   amounts   as extraneous  income  is  correct.  Learned  counsel  for  the appellant  has pressed four items in this  connection.   The first  item relates to a sum of Rs. 3.47 lacs.  It  is  said that  this  was  not the income of the  year  and  therefore should  not have been taken into account in arriving at  the gross profits.  The exact position with respect to this item is  not  clear  and  in any case  learned  counsel  for  the appellant  appearing before the tribunal conceded  that  the amount  could not be deducted from the profits.  In view  of that  concession we are not prepared to allow the  deduction of  this amount as extraneous income.  The second item is  a sum  of  Rs. 1.76 lacs in respect of the  rebate  earned  on insurance by the appellant with other companies by virtue of its holding principal agency.  Obviously this is part of the insurance  business  of the appellant and the work  in  this connection  is entirely handled by the insurance  department of  the  appellant; as such the tribunal was  right  in  not allowing  this amount as extraneous income.  The third  item is  a  sum of Rs. 3-33 lacs being gain on  foreign  exchange transactions.   These  transactions are carried  on  in  the normal course of business of the appellant.  As the tribunal has  rightly  pointed out, if there had been loss  on  these transactions  it  would have certainly gone  to  reduce  the gross profit,%; if there is a profit it has to be taken into account as (1)[1960] 1 S.C.R. 1. 171 it  has arisen out of the normal business of the  appellant. The tribunal was therefore right in not allowing this amount as  extraneous income.  The last item is a sum of  Rs.  9.78 lacs being commission on transactions by government agencies and  other organisations with manufacturers  abroad  direct. It  seems that the appellant is the sole agent in  India  of certain foreign manufacturers and even when transactions are made  direct with the manufacturers the appellant gets  com- mission  on such transactions.  The tribunal has  held  that though  the transactions were made direct with  the  foreign manufacturers, the respondents were entitled to ask that the commission  should  be taken into account  inasmuch  as  the respondents  serviced  the goods and did  other  work  which brought such business to the appellant.  It seems that there is  no  direct evidence whether these  particular  goods  on which this commission was earned were also serviced free  by the  appellant  like other goods sold by it  in  India.   We asked  learned counsel for the parties as to what the  exact position  was in the matter of free service to  such  goods. The  learned counsel however could not agree as to what  was the exact position.  It seems to us that if these goods  are also  serviced  free or for charges but in the same  way  as other goods sold by the appellant in India, the  respondents are entitled to ask that the income from commission on these goods should be taken into account.  As however there is  no

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

definite evidence on the point we cannot lay down that  such commission  must always be taken into account.  At the  same time, so far as this particular year is concerned we have to take this amount into account as the appellant whose duty it was to satisfy the tribunal that this was extraneous  income has failed to place proper evidence as to servicing of these goods.   A claim of this character must always be proved  to the  satisfaction of the tribunal.  In the circumstances  we see no reason to interfere with the order of the tribunal so far as this part of its order is concerned. Two other points have been urged on behalf of the 172 appellant  with respect to the interest allowed  on  capital and on working capital.  The tribunal has allowed the  usual six  per  cent  on  capital and four  per  cent  on  working capital.  The appellant claimed interest at a higher rate in both  cases.   We agree with the tribunal that there  is  no special  reason  why  any higher rate of  return  should  be allowed to the appellant. This  brings  us to the objections raised on behalf  of  the respondents.  The main objection is to a sum of Rs. 4.4 lacs allowed  by the tribunal as income-tax, which is said to  be with respect to the previous year.  It appears that there is a  difference between the accounting year of  the  appellant and  the financial year.  In the particular year in  dispute there  was an increase in the rate of tax which resulted  in extra  payment which had to be paid in this year.  In  these special circumstances, therefore, the tribunal allowed  this amount and we see no reason to disagree. Next it is urged that the tribunal had allowed a sum of  Rs. 4.76  lacs  for  making provision for gratuity  as  a  prior charge.   This  is obviously incorrect, as  this  Court  has pointed  out  in the Associated Cement Companies’  case  (1) that  no  fresh items of prior charge can be  added  to  the Full-Bench  formula, though at the time of  distribution  of available  surplus such matters, as provision  for  gratuity and debenture redemption fund, might be taken into  account. This disposes of the objections relating to the accounts. Two   other  points  have  been  urged  on  behalf  of   the respondents.  They are with respect to (1) salesmen and  (2) apprentices.  The tribunal has excluded these two categories from the award of bonus made by it.  The respondents contend that they should also have been included.  We are of opinion that the decision of the tribunal in this behalf is correct. So far as salesmen are concerned, the tribunal has  examined the  relevant decisions of other tribunals and has  come  to the  conclusion  that salesmen who are given  commission  on sales  are  not  treated on par with other  workmen  in  the matter  of bonus.  It has also been found that the  clerical work done by salesmen is small and incidental to their  duty as such; salesmen have (1)  [1959] S.C.R. 925. 173 therefore been held not to be workmen within the meaning  of the  Industrial Disputes Act.  The tribunal has pointed  out that  the  commission on an average works out at  about  Rs. 1,000 per mensem in the case of salesmen and therefore their total emoluments are quite adequate.  Besides, the  salesmen being paid commission on sales have already taken a share in the  profits of the appellant on a fair basis and  therefore there  is no justification for granting them  further  bonus out  of  the  available  surplus of  profits.   As  for  the apprentices, the tribunal has held that there is a  definite term  of  contract between them and the appellant  by  which they  are  excluded  from getting bonus.   Besides,  as  the

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

appellant  has  pointed  out,  the  apprentices  are  merely learning   their  jobs  and  the  appellant  has  to   incur expenditure on their training and they hardly contribute  to the  profits  of the appellant.  The view  of  the  tribunal therefore with respect to apprentices also is correct. We  now  turn  to  calculation  of  the  available   surplus according   to  the  decision  in  the   Associated   Cement Companies’ case (1).  The gross profit found by the tribunal will  stand  in view of what we have said  with  respect  to various  items  challenged by either party.   The  chart  of calculation will be as follows:-                                                in Lacs           Gross profits                     Rs. 109.97 Less depreciation                                 3.28 Balance                                         106.69 Less income-tax @ 51.15 per cent.              54.20 Balance                                          52.49 Less dividend tax, wealth tax etc.               7.50 Balance                                          44.99 Less return on capital at 6 per cent.                                  13.20. Balance                                          31.79 Less return on working capital at 4 per cent.                                       1.66 Available surplus                             30.13. (1)  [1959] S.C.R. 925. 174 Out  of  this, the tribunal has allowed five  months’  basic wages  as  bonus to the respondents which works out  at  Rs. 16.80 lacs.  In the circumstances it cannot be said that the award  of  the tribunal is not justified.  We do  not  think that we would be justified in giving anything more than what the  tribunal  has  awarded, because the  appellant  has  to provide  for  a fund for gratuity, for it is a  new  concern which took over the old employees of another concern when it was  started  and  has  thus  a  greater  liability  towards gratuity than otherwise would be the case.  We are therefore of  opinion that the tribunal’s award of five months’  basic wages  as  bonus for the year in dispute should  stand.   We therefore dismiss both the appeals.  In the circumstances we pass no order as to costs.                      Appeals dismissed.