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PETITIONER: BAREILLY ELECTRICITY SUPPLY CO.  LTD.

       Vs.

RESPONDENT: THE WORKMEN & ORS.

DATE OF JUDGMENT16/08/1971

BENCH: REDDY, P. JAGANMOHAN BENCH: REDDY, P. JAGANMOHAN MITTER, G.K.

CITATION:  1972 AIR  330            1972 SCR  (1) 241  1971 SCC  (2) 617  CITATOR INFO :  RF         1973 SC2394  (15)

ACT: Industrial   Dispute-Bonus-Available   surplus-Full    Bench formula--Documents filed before Industrial Tribunal  whether require  formal proof-Depreciation for  double  shift-Allow- ances  for  income-tax, computation  of--Return  on  working capital-Amounts required for rehabilitation-Contingency  and Development reserves-Financial capacity.

HEADNOTE: The  appellant  was  an  electricity  supply  company.   The dispute  between the appellant and its workmen  relating  to the  bonus payable for the year 1960-61 was referred to  the Industrial  Tribunal.  The case ,of the appellant  was  that after  allowing for prior charges no available  surplus  was left  for  the  payment of  bonus.   The  Tribunal  however, computed  the available surplus at Rs. 1,29,248 and  out  of this awarded three months’ bonus amounting to Rs. 730,00  to the  workmen.  In appeal to this court it was  contended  on behalf  of the appellant that the Tribunal was in  error  in disallowing (a) depreciation on account of double shift, (b) income-tax, (c) return on working capital, (c)    amounts required  for  rehabilitation, (e) contingency  reserve  and (f)development  reserve,  the  latter  two  of  which   were statutory  reserves  which the undertaking  had  to  provide under the schedule to the Electricity Supply Act 1948. Inter alia the appellant contended that since the Evidence Act  as a whole was not applicable to industrial proceedings certain documents such as balance sheet should have been accepted by the Tribunal without formal proof. HELD:     (i)  In  earlier cases decided by  this  Court  in which  the  Full  Bench  formula  of  the  Labour  Appellate Tribunal had been considered by this Court with reference to Electricity  Undertakings  and  other  wise,  the  following principles were laid down for the purpose of working out the available  surplus:  (1)  first gross  profits  have  to  be ascertained  and  for  that purpose  balance-sheet  and  the profit and losses count as required under the Companies  Act have  to be looked into.  If the entries are contested  they have  to  be proved like any other contested fact;  (2)  The relevant  year  for  which  bonus  is  claimed  is  a   self

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sufficient unit and the appropriate accounts have to be made on  the notional basis in respect of the said year; (3)  The ascertainment of depreciation is according to the Income-tax Act  and  what is allowed as a prior charge  is  the  annual notional normal depreciation and not the actual depreciation which  is in fact allowed.  Apart from the  notional  normal depreciation the depreciation allowable under Income-tax Act for multiple shift is also allowable; (4) In calculating the income-tax  for  deduction as a prior charge it is  not  the notional  normal depreciation alone that has to be  deducted but the statutory -depreciation namely the concessions given under  the  Income-tax  Act to  the  employers  which  would include  the depreciation for multiple shifts, if -any,  and thereafter the income-tax 242 will  have to be calculated; (5) Return on paid  up  capital allowable  for  deduction from the gross profits  is  6%;  a slightly   higher   percentage  may  be  allowed   in   risk undertakings  like plantations; (b) In regard to  return  on working  capital,  if it is, shown that  the  reserves  were available and were actually used as working capital, whether the  reserves  utilised were depreciation  reserves  or  any other, a return from 2% to 4% is allowable according to  the industry,    taking   into   consideration    any    special circumstances  which  may  justify  a  claim  for  a  higher interest; (7) Rehabilitation reserve has to be provided  for in  order  to  keep the original  capital  of  the  business intact.   It is necessary in the interest of labour as  well as capital to Provide for depreciation of the assets  yearly and   also  to  provide  for  rise  of  prices.    For   the determination  of  this  receive it is  suggested  that  the undertaking be first divided into blocks such as ’plant  and machinery’  on  the  one band and other  assets  like  Road, Buildings,  Railways, sidings etc. on the other.   Then  the cost  of  these separate blocks has to  be  ascertained  and their  probable future life has to be estimated.  Once  this estimate   is  made  it  becomes  possible   to   anticipate approximately  the  year when the plant  or  machinery  will require  replacement; and it is the probable price  of  such replacement  on  a future date that decides  the  amount  to which  the employer is entitled by way of replacement  cost. The   claim  for  rehabilitation  includes  the  claim   for replacements  and  modernization.   The  probable  cost   is reached by adopting a multiplier based on the ratio, between the  cost price of the plant and machinery and the  probable price  which  may have to be paid  for  its  rehabilitation, replacement   or  modernization.   After  ascertaining   the multiplier,  a divisor has to be adopted in respect of  each block  in order to ascertain the annual requirement  of  the employer  in  that behalf year after year;  (8)  In  Mathura Parshad Srivastava’s case the claim for contingency  reserve and  development  which  have  to  be  provided  under   the Electricity  (Supply)  Act was upheld though  these  do  not constitute  prior charges like items (3), (4), (5), (6)  and (7)  above.  The Tribunal cannot fix such a high  figure  of bonus  as  to leave insufficient funds in the bands  of  the company  and  make  it difficult to provide  for  these  two statutory reserves.  Various factors including the financial capacity  of the undertaking to pay, have to be  taken  into account in fixing bonus. [251 C.-254 G] Mill  Owners  Association, Bombay v. The  Rashtriya  Mazdoor Sargh,  Bombay  & Anr., [1950] L.L.J. 1247, Muir  Mills  Co. Ltd.,  v. Suti Mill Mazdoor Union, Kanpur, [1951]  1  S.C.R. 991, U.P. Electricity Supply, Co.  Ltd.,, v. Their  Workmen, (1952)  2 L.L.J. 43 1, Shree Meenakshi Mills Ltd.  v.  Their

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Workmen,  [1968]  S.C.R.  878,  Tinavelly-Tuticorn  Electric Supply  Co.  Ltd.,  v. Their Workmen, [1960],  3  S.C.R.  68 Ahmedabad   Miscellaneous   Industrial  Workers   Union   v. Ahmedabad  Electricity  Co.  Ltd.,  [1962]  2  S.C.R.   934, Associated  Cement  Companies Ltd., v. Its  Workmen,  [1959] S.C.R. 925 Surat Electricity Co. Ltd., Staff Union v.  Surat Electricity Co. Ltd., [1957] 2 L.L.J. 648, Hamdard Dawakhana Wakf v. Its Workmen & Ors., [1962] 2 L.L.J. 772, Workmen  v. Hindustan  Motors  Ltd.,  [1968] 2 S.C.R.  311  and  Mathura Parshad Srivastava v.    Sagour Electric Supply Co. [1966] 2 L.L.J. 307, referred to. (ii) Even if all the technicalities of the Evidence Act  are not  strictly applicable except so far as Section It of  the Industrial  Disputes  Act  1947  and  the  rules  prescribed therein permit it, it is inconceivable that  243 the  Tribunal  can  act  on what is  not  evidence  such  as hearsay, nor can it justify the Tribunal in basing its award on  copies  of  documents when the originals  which  are  in existence are not produced and proved by one of the  methods either by affidavit or by witnesses who have executed  them, if  they  are alive and can be produced.  Again if  a  party wants an inspection it is incumbent on the Tribunal to  give inspection  in  so far as that is relevant to  the  enquiry. [259-D F] The application of the principle of natural justice does not imply  that what is not evidence can be acted upon.  On  the other hand what it means is that no materials can be relied. upon  to establish a contested fact which are not spoken  to by  persons  who are competent to speak about them  and  are subjected  to  cross-examination by the party  against  whom they are sought to be used. [258 H] When the appellant in the present case produced the  balance sheet and profit and loss account of the company, it did not by its mere production amount to proof of it or of the truth of the entries therein. If these entries are challenged  the appellant must, prove each of such entries by producing  the books  and  speaking from the entries made  therein.   If  a letter or other document is produced to establish some  fact which is relevant to the enquiry the writer must be produced or his affidavit in respect thereof be filed and opportunity given  to the opposite party who challenges this fact.  [259 B-D] Indian Hume Pipe Co. Ltd., v. Their Workmen, [1959] 2 L.L.J. 357  Khandesh  Spinning  and Wag.  Mills Co.  Ltd.,  v.  The Rashtriya  Grin Kamgar Sangh  Jalgaon,[1960],2S.C.R.841,Anil Starch  Products  Ltd.,v. Ahmedabad Chemical  Workers  Union Civil  Appeal No. 684 of 1957, Petlad Turkey Red  Dye  Works Ltd., v. Dves and Chemicals Workers Union, Petlad, [1960]  2 S.C.R.,  906,  Management  of  Trichinopoly  Mills  Ltd.  v. National  Cotton Textiles Mills Workers Union; Civil  Appeal No.  309 of 1957, Bengal Kagazkal Mazdoor Union v.  Titaghur Paper Mills Co. Ltd., [1964] 3 S.C.R. 38 and Union of  India v. Verma, [1958] 2 L.L.J. 259, referred to. (iii)     In view of the unsatisfactory oral and documentary evidence  the Tribunal was justified in rejecting the  claim for depreciation on the basis of double shift.  It could not be  assumed that in an Electric Undertaking the boilers  and turbines must be working throughout, at any rate more that 8 hours.  In view of disallowance the amount to be, allowed as prior  charge towards depreciation will have to be  computed after allowing for the notional depreciation. [260 F, 261B] (iv) The  computation  of income-tax by the  Tribunal  after deducting the statutory depreciation was in accordance  with the decisions of this Court and could not be assailed.  [262

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C-D] Burm  and  Co.  Ltd., v. Its Workmen,  [1954]  5  S.C.R.  82 referred to. (v)  In  considering a claim for return on  working  capital two questions must be kept in view; whether the reserve were available  and  if  they were, whether  they  were  used  as working  capital and if so, what is the amount.   These  are questions of fact and if the employer fails to establish  by satisfactory evidence the claim will have to be rejected. 244 In this case there was no proof that any of the reserves had been utilised. The claim in   this  respect  was   therefore rightly rejected by the Tribunal. [263 D-E] (vi) The  letters filed by the appellant in support  of  the replacement  cost had not been proved by any of the  persons who  wrote them or any of the representatives of  the  firms whose letters they were.  There was no oral evidence of  the precise  requirement for rehabilitation.  The  Tribunal  was justified in holding that the appellant had failed to  prove the original cost of the machines, plant and machinery,  its age,   the   probable  requirement  for   replacement,   the multiplier  and  the divisor.  In these  circumstances  this claim also had been properly disallowed. [264 C-G] (vii)     The   provision   for  contingency   reserve   and development  reserve  has been made  under  the  Electricity (Supply)  Act for a special purpose, namely to work out  the charges to be recovered from the consumers for the supply of Electricity but that does not mean that these are not to  be taken into consideration in declaring bonus though they have not  been treated as prior charges.  In these  circumstances the amount of Rs. 55,233 had to be provided for.  Except for this amount the computation made by the Tribunal         for ascertaining the available surplus was justified. [265C-D] (viii)    The  available surplus found by the  Tribunal  was Rs. 1,29,248.. If Rs. 55,233 is to be provided for  contain- envy reserve and development reserve there will be available surplus  of Rs. 74,015.  The Tribunal awarded  three  months bonus  amount  to Rs. 73,000 which works to Rs.  24,333  per month.   Having  regard to the financial  capacity  of  this Undertaking one month’s bonus which will leave a surplus for the  working  of  the Undertakings will  meet  the  ends  of justice. [265 E-F]

JUDGMENT: CIVIL  APPELLATE JURISDICTION : Civil Appeals Nos.  1254  of 1966. Appeal  by special leave from the Award dated  November  15, 1965   of  the  Industrial  Tribunal  (111),  Allahabad   in Adjudication Case No. 10 of 1962. G.   B. Pai and H. K. Puri, for the appellant. J.   P.  Goyal and M. V. Goswami, for respondent No. 1. P.   N. Tiwari, for respondent No. 2. The Judgment of the Court was delivered by P.   Jaganmohan  Reddy  J.-The Appellant is  an  Electricity Supply  Co., and in this Appeal by Special Leave  challenges the Award made against it, by the Industrial Tribunal  (111) at Allahabad on 15th November 1965.  The dispute between the Appellant  and  its  Workmen is one relating  to  the  bonus payable  for  the year 1960-61.  As an  amicable  settlement could not be arrived at, the  245

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State  of  U. P. by its order dated 24-1-1962  referred  the following dispute for adjudication to the Tribunal:               "Should the employers be required to pay bonus               to their workmen for the year 1960-61 ? If so,               at what rate and with what details ?" The case of the Appellant was that after allowing for  prior charges  no  available surplus was left for the  payment  of bonus  to workmen.  According to the Company a gross  profit of Rs. 6,06,684/- was earned for the year ending 31st March, 1961,  but the Tribunal added to it a sum of Rs. 9,949/-  as representing extraneous income and consequently computed the gross profit at Rs. 6,16,633/-.  The following prior charges were  claimed  by  the Appellant and we  have  indicated  as against  each one of these in the opposite columns what  the Tribunal has awarded and disallowed:- ------------------------------------------------------------           Amount                            Amount           claimed by                     allowed by           the Appell-                   the Tribunal           ant -------------------------------------------------------------- Expenses as per profit and      Rs.            Rs.      loss account:             1,32,156     1,32,156 Depreciation:                     Rs.      Normal      2,02,814     Notional normal:    2,02,814. Double shift.    28,413       Double shift:Nil.                  2,31,227     2,31,227 Income Tax                    1,09,485       1,04    4155 Contingency Reserve             32,900       Nil. Development Reserve             22,333       Nil. Return on share capital         48,000              48,000 Return on working capital       60,540       Nil. Rehabilitation requirement    15,66,497 Nil.                      Total    22,03,138            4,87,385 ------------------------------------------------------------ After  making the necessary allowance as  aforesaid  towards deductions claimed as prior- charges from the gross,  profit (Rs. 6,16,633/- minus Rs. 4,87,385/-) the Tribunal  computed the available surplus at Rs. 1,29,248/-.  Out of this amount of available surplus three months bonus which amounts to Rs. 73,000/-  was awarded as bonus leaving sufficient funds  for the Company to run its undertaking. 246 On behalf of the Appellant it is contended that the Tribunal was  in error in disallowing depreciation on account of  (a) double shift, (b) Income-tax, (c) return on working capital, (d)  amounts  required for rehabilitation,  (e)  contingency reserve and (f) development reserve, the latter two of which were  statutory  reserves  which the  under  taking  had  to provide for, under the schedule to the Electricity  (Supply) Act. The reasons given by the Tribunal for disallowing the double shift depreciation was that the Company did not produce  any documents to, show the total running hours of each boiler or turbine,  that  in  any case the evidence  relating  to  the running of each of the boilers and turbines does not justify the  claim  for  depreciation for the double  shift  on  the entire  plant  and machinery; that the  Company  could  only claim   double  shift  allowance  with  regard  to   certain specified  machinery and that in the previous years  it  had not  claimed  double shift allowance nor did  it  claim  any deductions before the Income-tax authorities for the year in question.  For these reasons it held that the Appellant  was not  entitled to claim the double shift depreciation  during

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the  year  in  dispute.  The  contingency  reserve  and  the development  reserve were disallowed as in the view  of  the Tribunal  they  were  not  a charge  on  the  profits.   The rehabilitation requirements were rejected on the ground that the  Company  had failed to prove the original cost  of  the plant  and machinery; that it had failed to show the  actual amount spent on rehabilitation of plant and machinery either in  the year in dispute or in any subsequent year;  that  no rehabilitation  allowance was claimed in the previous  year; that the cost of the assets of the Company had not been duly proved as engineers were not called and that the  quotations produced  by  the  Company could not be  relied  upon.   The return  on  working capital was disallowed on  two  grounds; namely that the calculation of the working capital has  been made  on the basis of the assets and rehabilitation as  they stood on the closing day of the year 1960-61 namely on 31-3- 61  Which  is a mistake because whatever may have  been  the assets and liabilities at the end of the year they would not be  the same at the beginning of the year nor could they  be applied  as the working capital.  The second ground is  that on the evidence it cannot be established that 247 any reserves were utilised as working capital, nor was there any necessity to do so. Before  us the learned Advocate of the Appellant  has  urged that  the  Tribunal  was  not  justified  in  rejecting  the material placed before it, from which the several deductions claimed  by it ought to have been allowed in  computing  the available surplus.  It will be convenient to deal with  each of  the items separately but before doing so we wish to  set out  several  factors and certain essential  features  which have  to  be  taken into consideration  in  claims  made  by workmen  for  bonus.  The basic assumption  which  has  been accepted  by this Court approving the first and second  Full Benches  of the Labour Appellate Tribunal is that the  award of  bonus  is  not by way of an  ex-gratia  payment  but  in furtherance  of  social  justice the claim  of  capital  and labour  which contribute to the earnings of  the  industrial concern,  make it equitable to grant labour the  benefit  of their  efforts if there is a surplus.  The first full  Bench in  the  Mill Owners Association, Bombay  v.  The  Rashtriya Mazdoor  Sangh, Bombay and Anr.(i), had laid down a  general formula applicable for determining the available suprplus of an Industrial undertaking for the purposes of awarding bonus to  its  workmen.   The first step in  this  regard  is  the ascertainment  of the gross profits of a concern, which  are arrived at after payment of wages and dearness allowances to the employees and other items of expenditure.  The next step is to ascertain what are the prior charges which have to  be deducted  from the gross profits in order to arrive  at  the available surplus. The  Full  Bench formula concerns the claim of  capital  -to prior charges which have to be taken into account to give  a fair  return to the investor and also to keep  the  industry working efficiently which in the long run will inure to  the benefit  of labour.  The items considered as  prior  charges are  : (1) fair return on-(a) paid up capital;  (b)  working capital;  (c)  reserves utilised as  working  capital  which obviates  the  necessity  to  borrow  at  higher  rates   of interest.  (2)  Amount of money  required  for  replacements rehabilitation  and  modernization  of  machinery.  (3)  De- preciation allowed by the Income-tax authorities being  only a percentage of the Written down value, the fund set apart (1) [1950] L.L.J. 1247. 17-M 1245 Sup.  Cl/71

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248 yearly for depreciation and designated under that head would not  be  sufficient for these purposes, so an  extra  amount would  have  to  be annually set  apart  under  the  heading reserves  to make up the deficit.  The question what is  the ratio  of the available surplus which could be awarded as  a bonus  was  also considered.  The Full Bench felt  that  the answer  was not an easy one, but essentially the quantum  of bonus  must  depend  upon the  relative  prosperity  of  the concern  during the year under review which is reflected  in the amount of surplus; the needs of labour at existing wages is also a consideration of importance.  It observed in  para 37:               "........  but  we should make it  plain  that               these    are   not   necessarily   the    only               considerations;  for  instance  no  scheme  of               allocation of bonus could be completed if  the               amount  of  which  bonus  is  to  be  paid  is               unrelated to the employees" efforts; and  even               when    we    have   mentioned    all    these               considerations  we must not be deemed to  have               exhausted the subject". This Court in Muir Mills Co. Ltd. v Suti Mill Mazdoor Union, Kanpur(1), generally accepted as sound the view of the  Full Bench, that since labour and capital both contribute to  the earnings  they should derive benefit, if there is a  surplus after meeting the four prior or necessary charges  specified in  the formula.  However, neither the priority  as  between the four prior charges and their relative acceptance nor the conditions upon which they were allowed was examined by this Court, but it was nevertheless held that bonus is neither  a gratuity  nor  gift  nor  can it  be  regarded  as  deferred payment.  The principles enunciated by the First Full  Bench had  been approved in U. P. Electricity Supply Co.  Ltd.  v. Their  Workmen(2)  as being also applicable  to  Electricity Undertakings.   It was pointed out that in  determining  the available  surplus  it is not the profits that  have  to  be determined as required under the Electricity (Supply) Act 54 of  1948, which had to be, considered but the gross  profits as  computed  from  the balance sheet and  profit  and  loss account  to be prepared under the Companies Act, subject  to scrutiny if challenged.  The reason for (1) [1955] (1) S.C.R. 991.             (2) [1952].(2) L.L.J. 431...  249 non-applicability of the Electric (Supply) Act according  to this  Full  Bench was that the object of ’the Act  being  to reduce the price of electricity which was affected by fixing a  maximum above which the profits of the concern shall  not rise, the formula of the first Full Bench which was intended to do social justice was at variance with the purpose  which the Electricity (Supply) Act was intended to subserve.   The Tribunal said at page 4381:               "There  is therefore no basis between the  two               for  any convergence on the point of bonus  as               now  understood;  it  is  not  permissible  to               inject   the   Full  Bench  items   into   the               Electricity (Supply) Act and on the other hand               the accounting under the Electricity  (Supply)               Act  is  at variance  with  normal  commercial               practice under the Companies Act and with  the               basis  of  our Full Bench  decision.   In  the               result we have come to the conclusion that our               Full Bench decision must reapplied as a  whole               for  the  ascertainment  of  bonus  of   these

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             concerns.   This, however, does  not  preclude               consideration    of   the   suggestions    for               clarification and modification.............." This decision was approved by this Court in Shree, Meenakshi Mills  Ltd.  v.  Their Workmen(1) but that was  not  a  case dealing  with  an Electricity undertaking.  The  case  which dealt   directly   with  an  Electricity   Undertaking   was Tinavelly-Tuticorn  Electric Supply Co. Ltd. (also  referred to  as  T. T. E. Supply Co.) v. Their Workmen.(2),  In  this case  also this Court held that the Full Bench  formula  was applicable  to  electrical undertakings and to  the  formula relating to the statutory depreciation except for additional and  initial  depreciation-though there was  nothing  in  it which would indicate whether the depreciation deductible was according to the Electricity (Supply) Act or the  Income-tax Act.   There  is  however,  no  doubt  that  in  the  U.  P. Electricity  case  the  Full Bench did  in  fact  apply  the income-tax   Rules   for  ascertaining   depreciation.    In Ahmedabad   Miscellaneous   Industrial  Workers   Union   v. Ahmedabad  Electricity  Co. Ltd.(1) the Full  Rench  formula applying the Income-tax Act rules to ascertain  depreciation as  a prior charge was approved.  It was also observed  that it was not open to the Appellant to raise the question that (1) [1958] S.C.R. 87 (2) [1960](3) S.C.R. 68. 3 [1962] 2 S.C.R. 934. 25 0 the  provisions of the seventh schedule to  the  Electricity (Supply)  Act should be applied for purposes of  calculating depreciation  in  preference  to  the  income-tax  rules  in working ,out the Full Bench formula.  Even on the assumption that  the question was still open, because as  Wanchoo,  J., -observed  "it was never directly raised in this  Court  and specifically decided" they were of opinion that the  Income- tax rules should be applied in preference to the  provisions of  the  Seventh Schedule to the Electricity  (Supply)  Act. The  reasons  for arriving at that conclusion are  given  at pages  939-941.  In Associated Cement Companies Ltd. v.  Its Workmen(1),  Gajendra gadker, J., (as he then was)  said  at page 944 with reference to Muir Mills Company case that:               "neither  the propriety nor the order  of  the               priority as between the four prior charges and               their  relative importance nor  their  content               was  examined by this Court in that case;  and               though  the  formula  has  :subsequently  been               generally  accepted by this Court  in  several               reported  decisions...... the  question  about               -the  adequacy, propriety or validity  of  its               provisions  has not been examined nor had  the               general  problem  ,as to whether  the  formula               needs any variation, change ,,or addition been               argued  and considered.  It is for  the  first               tinge since 1950 that in the present  appeals,               we  are  ,called upon to examine  the  formula               carefully  and  express our  decision  on  the               merits of its specific provisions." Having examined the several aspects of the formula in  great ,detail  and  if  we  may say  so  with  respect  with  some thoroughness  the  various  matters dealt with  by  the  two Tribunals  -in  respect  of the prior  charges  relating  to depreciation, incometax; fair return on capital, fair return on  reserves  utilised -as working capital  and  any  amount required  in excess ,of the depreciation for the purpose  of rehabilitation, replacement and modernization of  machinery, the  formula  evolved there in has been  approved.   In  the

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application  of  the formula for determining  the  available surplus, the balance sheet and profit and loss account of an undertaking are important documents.  At any rate the  proof of  the  various  prior  charges  has  to  be  given,  after affording an (1)  1959 S.C.R. 925.  251 opportunity to the workmen, if need be, by the cross -exami- nation to contest it. The  formula of the Full Bench both in the Textil  case  and its  application to the Electricity Undertakings as held  in the  U.  P. Electricity case has now been accepted  by  this Court  in  several  cases  with  further  clarification  and elucidation.    We  can  therefore  deduce   the   following principles  for  ascertainment of the available  surplus  in respect  of an Industrial undertaking and/or an  Electricity Undertaking:               (1)First   gross  profits  have  to  be   a               scertainad  and for that purpose the  balance-               sheet  and  the  profit and  loss  account  as               required  under  the Companies Act has  to  be               looked  into.   If the entries  are  contested               then  they  have to be proved like  any  other               contested fact.               (2)The  relevant  year  for  which  bonus   is               claimed  is  a self sufficient  unit  and  the               appropriate  accounts have to be made  on  the               notional  basis in respect of the  said  year.               ’Once  the bonus year is taken as a Unit  self               sufficient  by  itself  the  decision  of  the               Labour  Tribunal  in regard to the  refund  of               excess  profits tax and the adjustment of  the               previous   years  depreci-ation   and   losses               against  the  bonus  year’s  profit  must   be               treated as logical and sound.’               (3)The   ascertainment  of   depreciation   is               according  to the Income-tax Act and  what  is               allowed  as  a  prior  charge  is  the  annual               notional  normal  depreciation  and  not   the               actual depreciation which is in fact  allowed.               The  formula  of the Full Bench  in  the  U.P.               Electricity case as explained and clarified in               Surat  Electricity"Co.  Ltd.  Staff  Union  v.               ’Surat Electricity Co.  Ltd., (1) was approved               in  the  Ahmedabad  Miscellaneous   Industrial               Workers Union case and in the case in  Hamdard               Dawakhana  Wakf v. Its Work-. men &  Ors.  (2)               Apart  from the notional  normal  depreciation               the  depreciation allowable  under  Income-tax               Act for multiple shift is also allowable.               (1) [1957] (2) L..LJ. 648.               (2) [1962] (2) L.L.J. 772-               25 2               (4)In calculating the Income-tax for deduction               as prior charge it is not the notional  normal               depreciation alone that has to be deducted but               the   statutory   depreciation   namely    the               concessions given under the Income-tax Act  to               the   employers   which  would   include   the               depreciation  for multiple shifts if any,  and               thereafter  the  Income-tax will  have  to  be               calculated.               (5)   Return on paid up capital allowable  for               deduction from the gross profits is 6%.   This               ’is generally the formula adopted by the  Full

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             Bench  for Industrial Undertakings  though  it               has  been  known to have  allowed  a  slightly               higher   percentage   of   return   in   risky               undertakings like plantations.               (6)   Return on working capital.  This  amount               is  also  allowed but at a  lower  rate.   The               formula  as approved by this Court is that  if               it  is shown that the reserves were  available               and  -were  actually used as  working  capital               whether    the    reserves    utilised    were               depreciation  reserves or any other, a  return               from  2% to 4% is allowable according  to  the               industry,   taking  into   consideration   any               special  circumstances  which  may  justify  a               claim for a higher interest.  The  utilisation               of  the  reserves  obviate  the  necessity  to               borrow  from  outside sources and  pay  higher               interest  which  will be to the  detriment  of               labour  as the available surplus is likely  to               be  less on this account,Workmen v.  Hindustan               Motor Ltd.(1)               (7)Rehabilitation  reserve  also  has  to   be               provided  for  in order to keep  the  original               capital of the business in tact because assets               of  an Undertaking waste -and or lost  by  the               end  of a particular period depending  on  the               nature of the Undertaking and its asset.   The               -only  value of such assets at the end of  the               period is , the scrap value.  It is  therefore               necessary in the interest of labour as well as               capital  to provide for depreciation  of  such               assets  yearly and also to take  into  account               and provide for the rise in prices after-  the               war.  The determination of this reserve  poses               problems,   but  it  was  suggested   that   a               reasonable method would be first to divide the               undertaking into               (1)   [1968] (2) S.C.R. 311 340, 342, 344.                253               blocks  such as "Plant and machinery"  on  the               one   hand  and  other  assets   like   Roads,               Buildings, Railway sidings etc. on the  other.               Then the cost of these separate blocks has  to               be ascertained and their probable future  life               has  to be estimated.  Once this  estimate  is               made   it  becomes  possible   to   anticipate               approximately  the  year  when  the  Plant  or               machinery  would need replacement; and  it  is               the  probable’ price of such replacement on  a               future date that ultimately decides the amount               to  which the employer is entitled by  way  of               replacement     cost.     The    claim     for               rehabilitation  includes  also the  claim  for               replacements  and modernization.  It is  quite               conceivable  that certain parts  of  machines,               which    constitute   a   block    may    need               rehabilitation  though  the block  itself  can               carry on for a number of years.  This  process               of  rehabilitation is a continued process  and               unlike replacement, its date cannot always  be               fixed  or anticipated.  So with  modernization               all  these  three items are  included  in  the               claim  for  rehabilitation.  It  is  therefore               necessary for tribunals to exercise their dis-               cretion in admitting all available evidence to

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             determine  this  difficult  question.   For  a               fuller  discussion  in  see:  The   Associated               Cement  Companies case at pages 966-968.   The               probable   cost  is  reached  by  adopting   a               multiplier based on the rates between the cost               price  of  the  plant and  machinery  and  the               probable  price which may have to be paid  for               its     rehabilitation,     replacement     or               modernization.   The  older  the  plant,   the               higher  the multiplier and hence the  area  of               conflict between the employer and employees is               larger,  the  former  allowing  the  asset  to               become  older to get a higher  multiplier  and               the latter feeling aggrieved because of it  as               the   provision  made  therefor  reduces   the               available surplus in the bonus year.  After as               curtaining the multiplier, a divisor has to be               adopted  in respect of each block in order  to               ascertain   the  annual  requirement  of   the               employer  in that behalf year after year.   As               this  provision  constitutes  a  large  amount               which eats into the gross profits and reduces  the               surplus  the  Tribunals  must  call  for   all               relevant  material evidence from the  employer               and   the  employees  should  be  allowed   to               properly test it by cross-examination.               25 4 The  deductions  specified in items (5), (6)  and  (7)  like those in items (3) and (4) are prior charges.               (8)In  Mathura  Parshad Srivastava  v.  Sagour               Electric Supply Co (1)., at page 309 the claim               for   contingency  reserve   and   development                             reserve  which  have to be provided  u nder  the               Electricity  (Supply) Act was upheld.  It  was               observed that though these do not constitute a               prior  charge  they  have  to  be  taken  into               consideration,  to  arrive at  the  figure  of               bonus   after   ascertaining   the   available               surplus.  The Tribunal cannot fix such a  high               figure of bonus as to leave insufficient funds               in  the  hands  of the  Company  and  make  it               difficult  to provide for these two  statutory               reserves.     After    taking    these    into               consideration  the ratio of available  surplus               for  distribution as bonus would depend  on  a               number  of factors and is not  susceptible  to               any general formula.  What these    factors               are were posed in the form of series of  questions               by Gajendragadkar, J., at page 973-974   in               the Associated Cement Co’s case, such as what   are               the wages paid, what is the extent of the gap  betwe en               the  same and a living wage, has the  employer               set  apart  any  gratuity fund,  what  is  the               extent  of the available surplus, what is  the               general financial    position of the employer,               what are the dividends    paid  and  has   the               employer to meet any urgent liability    etc.               The  fact that the employer would be  entitled               to    a rebate of Income-tax on the amount  of               bonus paid to his workmen has also to be taken               into account    and  in many cases it plays  a               significant part in the   final  distribution.               It  was also held that overtime payment  ought

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             not to have been taken into account as part of               the  basic wage in calculating bonus  payable.               This  innovation  would make  an  unreasonable               distinction     between workmen and workmen on               the basis thatG      some   have   contributed               more and the others less to the     earning of               profits. We  now  propose  to  examine each  of  the  claims  of  the Appellants  in the light of our observations as to the  for- mula  applicable in determining its validity  or  otherwise. At the outset it may be noted that on behalf of the Appel- (1)  [1966] (2) L.L.J. 307.  255 lant  only  a  solitary witness, M.  K.  Ghosh  a  Chartered Accountant  of  the  Company who on his  own  admission  had joined the Company six months prior to his giving_  evidence was produced.  Obviously this witness could not speak  about the  relevant matters from his personal’  knowledge.   Apart from  this  infirmity  the Tribunal  has  characterised  his eividence  as  contradictory,  evasive  and  not   reliable. Innumerable  statements, letters, balancesheet,  profit  and loss  account  and other documents called for  or  otherwise were filed on behalf of the Appellants.  It cannot be denied that the mere filing of any of the aforementioned  documents does not amount to proof of them and unless these are either admitted  by the Respondents. or proved they do  not  become evidence in the case. On  this  aspect  it  was  observed  in  Associated   Cement Companies case at page 956:               "As a general rule the amount of gross profits               thus    ascertained   is   accepted    without               submitting  the, statement of the  profit  and               loss  account to close scrutiny.  If  however,               it   appears  that  entries  have  been   made               deliberately  and  Male-fide  to  reduce   the               amount  of gross profits, it would be open  to               the Tribunal to examine the question....... The case of the Indian Hume Pipe Co., Ltd., v. Their Workmen (1)  however  seems to have given scope for  the  contention that the balance-sheet could be relied upon for proving that certain  amounts  stated therein were available for  use  as working capital and that it showed that they wherein fact so used.   In  fact  in  that case it  was  conceded  that  the reserves were in fact used as working capital.  Bhagwati J., who delivered the Judgment of the Court, presumably to  meet the  contention that the balance-sheet had not been  proved, observed at page 362 thus: "Moreover,  no objection was urged in this behalf,  nor  was any finding to the contrary recorded by the Tribunal." This  case was considered in Khandesh Spinning & Wvg.  Mills Co. Ltd., v, the Rashtriya Girni Kamgar- Sangh, Jalgaon, (2) it was pointed out that the observation is made; (1) [1959] (2) L.L.J. 357. (2) [1960] (2), SC.R. 841. 25 6 by  Bhagwati J, were not intended to lay down the  law  that the balance-sheet by itself was good evidence to prove as  , fact  the actual utilisation of reserves as working  capital Subba  Rao J. (as he then was) in that case,  while  dealing with the importance or rehabilitation reserve in the calcula -tion  of  the  available surplus pointed out  that  it  was necessary  for  Tribunals  to  weigh  with  great  care  the evidence  -of both parties to ascertain every sub-item  that went  into or subtracted, from the item  of  rehabilitation. If parties agreed figures could be accepted.  It they agreed

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to  a decision of affidavits, that course could be  adopted. But in the absence of.agreement the procedure prescribed  by Order  XIX, Code of Civil Procedure had to be followed.   He said at page 847:               "The  importance  of  this  question  in   the               contestant  01 fixing the amount required  for               rehabilitation cannot be over-estimated.   The               item  of rehabilitation is generally  a  major               item that enters into the calculations for the               purpose   of  ascertaining  the  surplus   and               therefore,  the  amount of bonus.   So,  there               would  be  a  tendency  on  the  part  of  the               employer  to  inflate  this  figure  and   the                             employees  to  deflate it.  The accoun ts  of  a               Company  are prepared by the management.   The               balance sheet and the profit, and loss account               are  also prepared by the Company’s  officers.               The labour has no concern in it.  When so much               depends on this item, the principles of equity               and  ,justice demand that an Industrial  Court               should  insist upon a clear proof of the  same               and also give a real and adequate  opportunity               to  the Labour to canvass the  correctness  of               the particulars furnished by the employer," At  Pages 847-850, the Indian Hume Pipe Co’s case  (citation given  is incorrect--the -correct citation is 1959  (2)  LLJ 357)  -Tata Oil Mills Co. Ltd., Vs.. Its  Workmen  (citation given in the report incorrect) and Anil Strach Products Ltd. v. Ahmedabad Chemical Workers Union, cases (1) were referred to  and  discussed.   It was pointed out  that  Anil  Starch Products Ltd., again reinforced the view of this Court  that proper  opportunity should be given  to the labour  to  test the correctness of the evidence given on (1)  Civil Appeal No. 684 of 1957.  257 affidavit on behalf of the management in regard -to the  use of the reserves as working capital. In  Petlad  Turkey Red Dye Works Ltd., v.  Dyes  &  Chemical Workers Union, Petlad & Anr. (1)., the question whether  the balance-sheet can be taken as proof of claim as to a portion of  the  reserve that has been used as working  capital  was again  considered.   The Khandesh Spinning & &  Wvg.   Mills case as well as the Management of Trichinopoly Mills Ltd. v. National  Cotton  Textile  Mills  Workers  Union  (2)   were referred to with approval.  The contention that Indian  Hume Pipe’s  case  held  otherwise  was pointed  out  to  be  not justified for "If it had been intended to state as a  matter of  law that the balance-sheet itself was good  evidence  to prove the fact of utilisation of a portion of the reserve as working  capital it would have been unnecessary to make  the observations referred to at page 362. In the Petlad Turkey Red Dye Works(1) case it was pointed by reference to the Trichinopoly Mills (2) case that the  ques- tion as regards the sufficiency of the balance sheet  itself to  prove the fact of utilisation of any reserve as  working capital  was  also  considered and it was  held  "that  the, balance  sheet  does not by itself prove any such  fact  and that  the  law requires that such an important fact  as  the utilisation  of a portion of the reserve as working  capital has  to  be  proved by the employer  by  evidence  given  on affidavit  or otherwise and after giving an  opportunity  to the  workman to contest the correctness of such evidence  by cross-examination". In Bengal Kagazkal Mazdoor Union v. Titaghur Paper Mills Co.

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Ltd. (3) Wanchoo J., (as he then was) observed at page 45 :               "It is now well settled that the balance-sheet               cannot  be taken as proof of a claim  to  what               portion of reserves has actually been used  as               working capital and that the utilisation of  a               portion  ’of the reserves as  working  capital               has  to be proved by the employer by  evidence               on   affidavit  or  otherwise   after   giving               opportunity  to  the workmen  to  contest  the               correctness   of  such  evidence   by   cross-               examination               (1)  [1960]2S.C.R.906.           (2) [1960]  2               L.L.J. (S.C.) 46.               (3)   [1964] 3 S.C.R. 38.               258               (See Patlad Turkey Red Dye Works Ltd. v.  Dyes               & Chemicals Workers’ Union)". An  attempt is however made by the learned Advocate for  the Appellant  to persuade us that as the Evidence Act does  not strictly  apply  the calling for of  the  several  documents particularly  after the employees were given inspection  and the reference to these by the witness Ghosh in his  evidence should  be  taken  as  proof  thereof  The  observations  of Venkatram  lyer J, in Union of India v. Varma, (1) to  which our attention was invited do not justify the submission that in  labour matters where issues are seriously contested  and have to be established and proved the requirements  relating to proof can be dispensed with.  The case referred to  above was  dealing  with  an enquiry into the  misconduct  of  the Public  Servant in which he complained he was not  permitted to cross-examine.  It however turned out that he was allowed to  put questions and that the evidence was recorded in  his presence.  No doubt the procedure prescribed in the Evidence Act  by first requiring his chief-examination then to  allow the delinquent to exercise his right to crossexamine him was not  followed,  but  that ,the Enquiry  Officer,  took  upon himself to cross-examine the witnesses from the very  start. It  was  contended that this method would violate  the  well recognised  rules of procedure.  In these  circumstances  it was observed at page 264:               "Now it is no doubt true that the evidence  of               the Respondent and his witnesses was not taken               in  the mode prescribed in the  Evidence  Act;               but  that Act has no application to  enquiries               conducted by Tribunal even though they may  be               judicial in character.  The law requires  that               such Tribunals should observe rules of natural               justice  in the conduct of the enquiry and  if               they do so their decision is not liable to  be               impeached  on  the ground that  the  procedure               followed was not in accordance with that which               obtains in a Court of Law". But the application of principle of natural justice does not imply  that what is not evidence can be acted upon.  On  the other hand what it means is that no materials can be  relied upon to establish a contested fact which are not (1)  [1958] 2 L.L.J. 259, 263-264.  259 spoken  to by persons who are competent to speak about  them and are subjected to cross-examination by the party  against whom  they  are  sought  to be used.   When  a  document  is produced  in  a  Court  or a  Tribunal  the  questions  that naturally  arise is, is it a genuine document, what are  its contents  and  are the statements  contained  therein  true. When the Appellant produced the balance-sheet and profit and

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loss  account  of  the  Company, it does  not  by  its  mere production  amount to a proof of it or of the truth  of  the entries  therein.   If  these  entries  are  challenged  the Appellant  must prove each of such entries by producing  the books  and  speaking from the entries made  therein.   If  a letter or other document is produced to establish some  fact which is relevant to the enquiry the writer must be produced or his affidavit in respect thereof be filed and opportunity afforded  to  the opposite party who challenges  this  fact. This is both in accord with principles of natural justice as also  according  to  the procedure -under  Order  XIX  Civil Procedure   Code  and  the  Evidence  Act  both   of   which incorporate  these  general principles.  Even if  all  tech- nicalities  of the Evidence Act are not strictly  applicable except  in so far as Section 11 of the  Industrial  Disputes Act  1947  and  the rules prescribed therein  permit  it  is inconceivable  that  the  Tribunal can act on  what  is  not evidence such as hearsay, nor can it justify the Tribunal in basing  its award on copies of documents when the  originals which are in existence are not produced and proved by one of the  methods  either by affidavit or by witnesses  who  have executed them, if they are alive and can be produced.  Again if  a  party  wants an inspection, it is  incumbent  on  the Tribunal to give inspection in so far as that is relevant to the enquiry.  The applicability of these principles are well recognised and admit of no doubt. We  now propose to examine the claim under each one ,of  the heads,  not-only those in respect of the prior  charges  but also  in  respect of contingency  and  development  reserves which  have to be taken into consideration  for  determining the  amount  of bonus to be declared out  of  the  available surplus. The first claim is in respect of depreciation on account  of double shift.  The Appellant did not claim any  depreciation in respect of electric cables.  The only 2 6 0 was  relating  to  plant and machinery  which  comprises  of boilers  and turbines.  Ghosh P. W. I stated that the  plant and machinery worked more than double shift.  In support  of his  statement  he filed Exhibit E. 16 which he  stated  was correct as he had verified it from the records.  Exhibit E.- 16 is not a document prepared by the witness but appears  to have  been  prepared and signed by  the  Resident  Engineer, according to which the total number of hours which the  four boilers and the four turbines had worked during 1960-61.  So far  as boilers are concerned all of them are said  to  have worked 21,327 hours the average of which for each boiler for the  year  was  computed at 5,331 8  hours.   Similarly  the turbines  worked 21,629 hours which works out to an  average of 5412 -3 hours per turbine per year.  If the year is taken as 365 days the average for the boiler and turbine works out to  14.6 and 14.8 hours while if it is taken as 300 days  it works at 17.77 and 18.04 hours respectively.  The  Appellant contends that there is no cross-examination of witness Ghosh nor   have   the  employees   challenged   this   statement. Accordingly he submits that a sum of Rs. 28,413/- should  be allowed.   It  is however admitted that no  claim  was  made before the Incometax Officer nor has any amount been allowed in  the Company’s assessment for the relevant year (see  Ex. 11).   But  even  if the amount was not  claimed  under  the Incometax  Act,  that does not by itself  preclude  us  from allowing  dreciation  for double or multiple shifts  but  in this case thee difficulty is that there is no -proof as such of  the  plant and machinery working double shift.   We  are asked  to  assume that any an Elec tricity  Undertaking  the

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boilers and turbines must be working throughout at any  rate more  than 8 hours.  We however, do not know to what  extent each  of these were working for how many days and  how  many hours each day.  The Resident Engineer was not produced  nor was Ghosh in a position to speak to the facts of the  state- ment therein from his knowledge or in any a credible  manner as to make his evidence acceptable.  The Tribunal said  that the  veracity  of  the statement Ex.  16  is  also  doubtful because  the employers have not produced anything before  it to show the total running hours of the boilers or  turbines. It  further went on to say "The Statement of M. K. Ghosh  is self  contradictory.  He has said one thing at one time  and quite another at another place in  2 6 1. respect of the same matter.  The Tribunal had to put to  the witness  scores of questions in order to clarify orin  order to  ascertain  which  of the two statements  made-,  by  the witness could be taken to be correct". We  think  the Tribunal was justified,  in  rejecting  this. claim.   In  view of this disallowance- the  amount  to  be, allowed as prior charge towards depreciation wil have to  be computed after allowing for the notional depreciation.- In calculating the amount deductible from gross profits.  on account of Income-tax the learned Advocate of the  Appellant contends that the Tribunal’s calculations were: wrong.  What the  tribunal  has done-is though it deducted  the  notional normal depreciation of Rs. 2,02,814/- from the gross profits it  had  for  the  purposes  of  computation  of’  Incometax deducted the statutory depreciation of Rs. 2,52,442/- and on the balances of that figure namely Rs.. 2,32,035/-  computed Income-tax  @  45% amounting to.  Rs.  1,04,415/-.   If  the contention  of the learned Advocate, for the  Appellant  was accepted  and only the notional nor-mal  depreciation  alone was  deducted  for computing the Income-tax  the  Income-tax deductible  would  come to Rs.. 1,26,748/-.   It  was  again sought to be contended that the development rebate on  plant installed  @  25  %  on, Rs.  1,28,513/-  amounting  to  Rs. 49,628/- could not form. part of the statutory reserve which together  with the notional normal depreciation came to  Rs. 2,52,4421-.  It was submitted that development rebate is not one of the species of’ depreciation; that it is a rebate for development which is, dehors depreciation and has nothing to do with the written down value of the asset for  calculating depreciation.   From  the Tribunal’s order it  would  appear that there was no dispute with respect to the provision  for Income-tax  or  its.  quantum because  after  deducting  the amount  of statutory depreciation the amount as computed  at 45 % is Rs. 1,04,415/- which was the amount claimed by it as statutoryreserve  as per Ex.  E. 13.  That the deduction  of statutoryallowance  for  computing Income-tax  is  the  true principleis borne out by the decisions of this, Court.   The contention  that only notional normal depreciation  and  not statutory,  depreciation  should be taken into  account  was raised in Bengal Kagazkal Mazdoor Union. v. Titaghur  peper- Mills Co. Ltd., where Wanchoo J. (as he then was) at page: 2 6 2 44  negatived  it but nonetheless, because  the  quantum  of statutory  depreciation  was in controversy and it  was  not possible  to calculate the correct amount of Income’-tax  to be  calculated  in  the absence of evidence,  the  case  was remanded  to the tribunal for further evidence for  arriving at the correct statutory depreciation to compute the  Income Tax.   Reference was also made to the Meenakshi  Mills  case and  the  Associated Cement Companies case.  In  the  latter case it was held at page 962 that in calculating the  amount

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of tax payable for the bonus year the Tribunals should  take into account the concessions given by the Income-tax Act  to the employers under the two more depreciations allowed under S.  10 (2) (vi) of the Income-tax Act.  In Burn & co Ltd.  v its  Workmen(1) also it would -appear "that  the  Income-tax after  making the allowance for statutory  depreciation  and development rebate was computed".  Though it is said that no reasons  were given ,this computation is in consonance  with the  decisions of this Court.  In this view the  computation of Income-tax by the Tribunal after deducting the  statutory depreciation  cannot be assailed.  The amount deductible  on this account will be Rs. 1,04,415/-. Two further items are sought to be deducted as prior charges namely  the  return  on  working  capital  and  the  amounts required for rehabilitation.  The claim of the Appellant for return on working capital was Rs. 40,360/which is 6 % on Rs. 10,09,000/-  said to have been employed in the  Undertaking. The Tribunal referred to Ex.  E. 17 in which details of  the reserves used as the working capital have been given as also another  statement  Ex.  E. 18 which showed details  of  the approximate   working  capital  required  for  running   the Undertaking.   Ex.  E. 6 is a statement. Showing the  annual wages and salaries and E. 7 shows ,deficiency of surplus  of funds  for normal working of the Undertaking.  The  Tribunal attached  no value to these -statements as the  calculations of working capital was arrived at on the basis of assets  of reserve as they stood on 31-3-61 i.e. on the closing day  of the  year 1960-61.  The ,learned Advocate for the  Appellant had  to  concede that the ’Tribunal was right  in  rejecting this  basis as the basis for working capital.  What he  says should  have been done ,was to have taken the amount at  the beginning of the year [1964] 5 S. C.R. 823. 263 namely  1st April 1960 and to add to this amount the  amount of  reserve  actually  utilised during  the  bonus  year  as working capital.  The evidence of Ghosh in this as in  other matters was of little assistance to the Appellant.  While he stated  that Rs. 10,09,000/- was the working capital of  the Company  during the year, in cross-examination  he  admitted that  the consumers deposits have been used in the  business as working capital.  Later on he sought to explain it by  an application in which he said that what he meant was that the consumers  deposit had been invested in the  business.   The Tribunal has carefully gone through this evidence and was of the  view  that  Ghosh has  given  contradictory  and  false statements  in respect of the consumers deposits  not  being used  as working capital.  This apart as already stated,  he has no personal knowledge.  In any case the Tribunal has  on an examination of the Cash Book and profit and loss  account Ex.   W. 16 and E. I held that the receipts of  the  concern are little more than two lacs a month which amount by itself would  be  sufficient to meet its day-to-day  expenses.   In considering  a  claim  for return  on  working  capital  two questions  must be kept in view; whether ’the reserves  were available  and  if  they were, whether  they  were  used  as working  capital and if so, what is that amount.  These  are questions of fact and if the employer fails to establish  by satisfactory  evidence the claim will have to  be  rejected. In this case we may point out there is no proof, that any of the reserves have been utilised.  Lastly the claim for rehabilitation has also to be rejected on the same grounds.  We have already discussed the approach that  has  to  be  made  in  considering  this  claim.    As rehabilitation  reserve is a substantial item which goes  to reduce  the available surplus and as a result,  effects  the

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right  of  the employee to receive the bonus,  the  employer will have, to place all relevant materials and the ,Tribunal will  have  to scrutinise these carefully and  be  satisfied that the claim is justified At the same time it is equitable also  in the larger interest of the industry as well  as  of the  employees that proper rehabilitation reserve should  be built up taking into consideration the increase in prices in plant  and  machinery which has to be replaced at  a  future date  and  by  the determination of  a  multiplier  and  its divisor.  The case of the Appellant is that the  requirement of  the Undertaking in this regard is Rs. 15,66,496/-..  The assets . MI245 SupCI/71 26 4 required to be replaced have been divided into three  blocks -one  upto  31-12-59,  the  second  from  January,  1940  to December  1947 and the third from January 1948 to March  31, 1961.  Certain statements were filed which were intended  to show  what  the  yearly  replacement cost  as  well  as  the original  cost  was,  as  also  the  life  and  the   yearly requirements of all the assets, the multiplier and  divisor. In support of the replacement cost, quotation of prices  Ex. E. 21 to E. 24 have been filed.  These are from M/s.  Martin Burn  Ltd.,  as Agents of M/s.  C. A. Pearson  &  Co.  Ltd., Babcocks  &  Willcox of India (P) Ltd.,  -Indian  Cable  Co. Ltd.,  representing British Insulated Calendar Cables  Ltd., and the Indian Iron & Steel Co. The first objection  against the  admissibility  of these letters is that they  have  not been proved by anyone of the persons who have written  these letters  or  any of the representatives of the  firms  whose letters they are.  As has been noticed Ghosh is the  omnibus witness  and he has no knowledge whatever in respect of  any of  the  matters-  stated therein nor can he  speak  to  the precise  requirement  for  rehabilitation.   It  is   rather surprising that the employer who is making such a big  claim have  not  called any one as a witness who  can  speak  with knowledge of the age, the, requirements and the increase  in the  prices  of replacements.  The original cost  ,of  these blocks  has been prepared by Shri Chatterji (Ex.  E. 19  and Ex. 20).  But he has, not been produced and an ,attempt  was made  to  prove  them through the evidence  of  Ghosh.   The Tribunal  states that a number of questions were put to  the witness  to ascertain as to how he calculated  the  original cost and his reply was that the same has been taken from the balance-sheet.   The balance-sheets for ,earlier years  have also  not been produced to show what the original cost  was. The  Tribunal  has examined these matters and  the  evidence relating thereto in great detail ,and we agree with it  that the  Appellant has failed to prove the original cost of  the machines,  plant  and  machinery,  its  age,  the   probable requirements   for  replacement,  the  multiplier  and   the divisor.   In these circumstances this claim also  has  been properly disallowed. There  is  then  the  claim  for  contingency  reserve   and development  reserve  which  it is not disputed  has  to  be provided under the Electricity (Supply) Act amounting to Rs. 32,900/- and Rs. 22,333/- respectively in all Rs. 55,233/-.  265 The  Tribunal,  however, has disallowed this  claim  on  the round  that since they have been created under the  Electri- city  (Supply) Act which according to its  understanding  of the  legal  position,  could not  be  deducted.   These  two reserves it may be stated have to be created under the  pro- visions of Clause V and Clauses V (a) of the Sixth  Schedule of  the  Electricity (Supply) Act, 1948.  The  Tribunal  has

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gone  into  the reason for the creation of  these  reserves, their use etc.  We have already examined the legal  position earlier  and  have noticed that the provision for  the  said reserves  has  been  made under the statute  for  a  special purpose namely to work out the charges to be recovered  from the  consumers for the supply of Electricity but  that  does not  mean that these are not to be taken into  consideration in  declaring  bonus though they have not  been  treated  as prior  charges.   We have referred to the  case  of  Mathura Prashad  Srivastava  as  supporting  this  view.   In  these circumstances the amount of Rs. 55,233 /- has to be provided for.   Except  for this amount the computation made  by  the Tribunal  for ascertaining the available surplus is  in  our view  justified.  The amount found by the Tribunal  in  this regard  is  Rs.  1,29,248/- and if Rs.  55,233/-  is  to  be provided there will be an available surplus of Rs. 74,015/-. The  Tribunal  as  we  / said  awarded  three  months  bonus amounting to Rs. 73,000/- which works out to Rs.  24,333/per month.  We think having regard to the financial capacity  of this  Undertaking  one  month’s bonus  which  will  leave  a surplus  for the working of the Undertaking, will  meet  the ends  of justice.  We accordingly order the payment  of  one month’s  wages  as bonus.  Each party will  bear  their  own costs in this Appeal. G.C.                                 Ordered accordingly. 266