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PETITIONER: BENGAL KAGAZKAL MAZDOOR UNION & ANOTHER

       Vs.

RESPONDENT: THE TITAGHUR PAPER MILLS CO. LTD.

DATE OF JUDGMENT: 11/04/1963

BENCH:

ACT:     Industrial  Dispute--Bonus--Computation--Gross  Profits- Income-tax--Working capital--Rehabilitation.

HEADNOTE:  An industrial dispute having arisen between the  appellants and the respondents, the Government of West Bengal  referred the dispute to the Second Industrial Tribunal, West  Bengal, for  determining the question of bonus for each of the  four years (from 1955 to 1959) and the method of its distribution amongst different categories of workmen including  temporary hands.  The tribunal on examination of the evidence applying the Full Bench Formula came to the conclusion that there was no  surplus in any of the four years for the grant of  bonus and therefore rejected the claim.  The appellants  thereupon appealed  to this Court with special leave.  The  Tribunal’s Award  was  impugned  by the  appellants  on  four  grounds, namely, tribunal went wrong in calculating (a) gross profits for the years 1956-57 (b) income-tax for all the four  years (c)  working  capital  for  all  the  four  years  and   (d) rehabilitation for all the four years.     Held  that if there had been any addition to the  profit on  account  of an increase in the value of the  stock  that would  be an extraneous profit for which no credit could  be claimed by the workmen and such extraneous profit could  not be taken into account in calculating the available  surplus. But in that case the result of the revaluation was not  that increased  value  was taken into  account in the  matter  of consumption of raw materials.  The Tribunal overlooked  this fact in applying the ratio of that case to the facts to  the present case.     Tats  Oil  Mitts  Go. Ltd., v. Its  Workmen,  [1960]   1 S.C.R. 1, explained.     If the stocks are revalued that is no reason for showing the  relevant cost on the debit side as consumption, for  in reality 39 the  revalued price is not  what the mills paid for the  raw materials  etc.  consumed  and therefore to  get  a  correct picture  of the actual profit made it is only  the  original cost price which will have to be taken into account for that purpose.   On  sale  of paper, the profit  must  be  on  the original  valuation of paper stock and not on  the  revalued figure.     FIeld  further, that at p. 962 of the decision  of  this Court  in  The  Associated  Cement  Companies  Ltd.  v.  Its Workmen, [1959] S.G.R.  925, the word "not" has been printed by  mistake  and  what the court then decided  was  that  in calculating  the amount of tax payable the  Tribunal  should

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take  into  account the concession given by  the  Income-Tax Act.   The Tribunal was wrong in calculating the income  tax after deducting the notional normal depreciation and not the statutory depreciation.     Sree  Meenakshi  Mills Ltd. v.   Their  Workmen   [1958] S.C.R. 878, referred to.     Held  further  that it is well settled  that  a  balance sheet cannot be taken as proof of a claim as to what portion of  reserves has actually been used as working  capital  and that  the  utilization of a portion of 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.  In the present case no acceptable  proof has been given and the method of proof was not proper.     Petled  Turkey  Red Dye Works Ltd. v. Dye  and  Chemical Workers Union, [1960] 2 S.C.R. 906, refered to.     Held further, that the question whether investments have been actually used as working capital is a question of  fact and  it has to be proved by proper evidence. In the  present case the Tribunal was wrong in assuming that all investments have  been used as working capital without any  evidence  to support this assumption.     Where  advances  have  been  given  for  obtaining   raw materials  etc.  they would certainly be part of the  amount used  as  working capital.  But where  advances  are  purely loans and where advances have not been made for the  purpose of  the business such advances cannot be taken to have  been used as working capital.     Held further that the determination of rehabilitation is a long term affair and once it has been determined it cannot go 40 on  increasing from year to year except in case of a  sudden appreciable rise in prices or on account of new blocks being added  followed by further rise of price after the  purchase of  the  new blocks.  All rehabilitation amounts  which  may have  been  allowed to the employer  for  rehabilitation  in previous years but remained unused for rehabilitation in the meantime  have to be taken into account in arriving  at  the amount required for rehabilitation.     The  Associated  Cement Companies Ltd. v.   Its  Workmen [1959] S.C.R. 925, referred to.     In  Kandesh  Spinning & Weaving Mills Co.  Ltd.  v.  The Rashtriya  Girni Kamgar Sangh Jalgaon, [1960] 2 S.C.R.  841, this  Court held that before a particular reserve  could  be said  to  be  not available for rehabilitation  it  must  be established  that  it had been reasonably  earmarked  for  a binding  purpose or the whole or a part of it has been  used as  working capital and that only such part of the  reserves coming  under either of the two heads can be said to be  not available  for  rehabilitation.   This  means  that  if  any reserve has been earmarked for a particular purpose which is binding it cannot be deducted from the gross  rehabilitation amount.   For example assessment kept in reserve for  paying debentures when they fail due or working capital which is in the shape of raw materials cannot be deducted from the gross rehabilitation  amount.   The  Tribunal  misunderstood   and misapplied  the ratio of this decision to the facts  of  the present case.

JUDGMENT:     CIVIL  APPELLATE  JURISDICTION : Civil Appeal  Nos.  550

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and 551 of 1962.     Appeals by special leave from the Award dated March  20, 1961 of the Second Industrial Tribunal, West Bengal, in Case No. VIII-27 of 1960.     Ajit  Roy Mukherjee, M.K. Ramamurthi,  R.K.  Garg,  D.P. Singh and S.G. Agarwal, for appellant (in C.A. 550 of 1962).     Ajit Roy Mukherjee and N.H. Hingorani, for the appellant (in C.A. No. 551 of 1962).     M.C. Setalvad,  D.N.  Mukherjee and B.N. Ghosh, for  the respondents. 41     1963. April 11. The Judgment of the Court was  delivered by     WANCHOO J.--These two appeals by special leave arise out of  the same award of the Second Industrial  Tribunal,  West Bengal and will be dealt with together.  The two appeals are by  two unions of workmen of the Titaghar Paper  Mills  Co., Titaghar  No. 1 and the Titaghar Paper Mills  Co.  Kankinara No.2.  The two mills have been treated as one. establishment and  are  under one management.  So the Government  of  West Bengal referred the dispute between the mills and the unions for  profit bonus for the years 1955-56,  1956-57,  1957--58 and  1958-59 to the tribunal for determining the quantum  of bonus  for  each  year and the method  of  its  distribution amongst different categories of workmen including  temporary hands.     The  tribunal  went  into the matter  and  came  to  the conclusion  after  the application of what is known  as  the Full Bench formula evolved by the Labour Appellate  Tribunal in  1950  and  approved by this Court  in   the   Associated Cement Companies Ltd. v. Its Workmen (1),  that there was no surplus  in any of the four years for the grant   of   bonus and  therefore rejected the claim of the workmen.   The  two appeals are  by the two unions against this award.     The  contention of the workmen is  that the.  tribunal’s conclusion that there was no available surplus in any of the years  is incorrect and four points have been urged in  this connection  to  show  how the tribunal  went  wrong.   These points are: (1)  The tribunal’s calculation of gross profits for  the  years 1956-57 was wrong; (2)   The  tribunal  went wrong in the matter of calculation of income-tax for all the four  years; (3)  The tribunal went wrong, in the matter  of calculating working capital for all (1) [1959] S.C.R. 925, 42 the  four  years;  and  (4)   The  tribunal  went  wrong  in calculating rehabilitation  for all the four years. We shall deal with these points one by one. Re. (1).     The contention in this behalf is that for the year 1956- 57  the  mills  revalued  their  stock  of  raw   materials, chemicals  and dyes etc. as well as general stores,  machine furnishings  etc.  and paper stock as well  as  coal  stock. This revaluation resulted in an increase of Rs.  38,81,618/- in  the  value of these things as on April  1,  1956.   This increase in value was reflected  in the  consumption of  raw materials, general stores and coal and in the sale of  paper with  the  result that the  profit-and-loss  account  showed inflated  figures  in terms of money on the  basis  of  this revaluation,  though  in  actual fact this  amount  was  not spent,  the  increase being merely due to a paper  entry  on account  of revaluation.  Therefore it is said that  as  the tribunal  ignored  this  aspect of the  matter  it  did  not correctly calculate the gross profits for the year  1956-57. The  tribunal in this connection relied on the  judgment  of

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this  Court  in the Tata Oil Mills Co. Ltd. v.  Its  Workmen (1),  and  said that if there had been any addition  to  the profit on account of an increase in the value of the  stock, that  would  be an extraneous  profit for  which  no  credit could  be claimed by the workmen and such extraneous  profit could not be taken into account in calculating the available surplus.   It is urged on behalf of the appellants that  the tribunal was in error in applying the principle laid down in the Tata Oil Mills Co.s case (1), to the facts of this case.     There is in our opinion force in this contention. It  is true  that  in The Tata Oil Mills case (1),  the  profit  of rupees  three  lacs  which  arose merely  on  account  of  a change in the method of accounting was treated as extraneous income; but the Judgment [1960] 1 S.C.R. 1. 43 of  that  case  does  not  show  that  the  result  of   the revaluation was that increased value was taken into  account in  the  matter of consumption  of raw materials  etc.   The tribunal  overlooked  this  fact when it proceeded to  apply the  ratio in the Tata Oil Mills case (1), to the  facts  of the present case. It has however been urged on behalf of the respondent that there is a contra-entry in  the  profit-and- loss  account and that shows that the tribunal was right  in ignoring  the effect of revaluation on the debit  side,  for the  same sum of money i.e. Rs. 38,81,618/- was  entered  on the credit side and so there could be no mistake in arriving at the correct gross profit for that year.  We have not been able  to  understand what the effect of this  entry  on  the credit   side   is in arriving at the gross profit  for  the year;   nor has the learned counsel for the respondent  been able  to  explain  the position clearly to us.   We  are  of opinion  that the matter requires looking into and  evidence may  have  to  be taken to find out  how  exactly  the  real profits  have been affected by showing on the debit side  as consumption  the  valuation  of  raw materials etc.  at  the revaluation  cost.   The matter will therefore  have  to  be investigated further. But it may be added that if the stocks are revalued that is no reason for showing the revalued cost on  the  debit  side as consumption,  for  in  reality,  the revalued  price  is  not what the mills  paid  for  the  raw materials  etc.,  consumed and therefore to  get  a  correct picture  of the actual profit made, it is only the  original cost price which will have to be taken into account for that purpose,  for  that  is what the  mills  actually  paid  for acquiring the raw materials.  Further on sale of paper,  the profit made must be on the original valuation of paper stock and not on the revalued figure which was not the cost to the mills of making the paper.  Finally it will also have to  be considered what is the effect of the so-called  contra-entry on the credit side of the profit and-loss  account for  that year.  Expert evidence may be necessary to explain (1) [1960] 1 S.C.R. 1, the position properly and arrive at the correct profits  for that  year  and so there will have to be a  remand  for  the determination of this question by the tribunal, as it is not possible for us on the materials available on the record  to arrive at a final conclusion ourselves. Re. (2).     The  contention  under this head is  that  the  tribunal while calculating income-tax has only taken into account the notional   normal   depreciation  and  not   the   statutory depreciation,  as  it  should have done.   This  matter  was considered  by  this Court in Sree Meenakshi Mills  Ltd.  v. Their  Workmen and again in the Associated Cement  Companies

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case (2), and it was pointed out that in calculating income- tax  the tribunal should  take into account the  concessions given by the  Income-tax Act to the employers, for two  more depreciations  are  allowed  under s. 10  (2)  (vi)  of  the income-tax  Act.   At p. 962 of the report in  the   Supreme Court  Reports,e  word  "not"  has  been         printed  by mistake  and  what  this Court then  decided   was  that  in calculating  the amount of tax payable, the tribunal  should take  into account  the  concessions given by the Income-tax Act,  though in the report it is printed that the   tribunal should  not  take into account the concessions.   This  will however be clear from the calculation of income-tax which is made  at  p.  994. Chart V shows that  the  notional  normal depreciation in that case was Rs. 100.22 lacs.  Note A below that  chart further shows that in arriving at the amount  to be  deducted  as  income-tax,  the  statutory   depreciation amounting  to  Rs. 165.49 lacs was deducted from  the  gross profits  and it was on the balance that  income-tax  payable was  calculated.   We  may add that a  correction  slip  was issued  later.   In  the  present  case  the  tribunal   has apparently calculated incometax after deducting the notional normal depreciation and not the statutory depreciation.  The contention (i) [1958] S, C. R, 878.    (2) [1959] S. C.R. 925. 45 of the appellants is that the statutory depreciation is much higher.  The respondent has not been able to controvert this contention of the appellants, though there does not seem  to be any evidence on the record as to what is the exact amount of  statutory depreciation allowed during these  years.   It seems that on behalf of the workmen calculation sheets  were put  in  for  all the four years,  according  to  which  the statutory depreciation was much higher than the depreciation which  was  deducted by the tribunal from gross  profits  in arriving  at the income-tax payable.  But as the  appellants were  unable  to  point out any evidence  beyond  their  own charts  to  prove the exact statutory depreciation  for  the years in controversy, it is not possible for us to calculate the  correct  amount  of income-tax to be  deducted  in  the absence  of such evidence.  The matter will  therefore  have to  go back to the tribunal for taking further  evidence  on this  point  and  then arriving at  the  amount  payable  as income-tax  after  deducting   statutory  depreciation  from gross profits. Re. (3).     Three  contentions  have been raised in this respect  on behalf  of  the appellants.  It is now well settled  that  a balance-sheet  cannot be taken as proof of a claim  of  what portion  of  reserves  has actually  been  used  as  working capital  and  that  the  utilization 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 b  cross-examination :(see Petlad Turkey  Red Dye  Works Ltd. v. Dyes & Chemical Workers’ Union (1).  What happened  in the present case was that the accountant of the respondent gave two alternative calculations for arriving at the reserves  used as working capital.  Thus there were  two figures  given by the respondent to show what reserves  were actually (1) [1960] 2 S.C.R. 906. 46 used   as  working  capital.   Further,  according  to   the accountant,  the lower figure represented the  assets  which could be at once converted into liquid cash while the higher

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figure  represented both cash invested in the  business  and liquid  cash that would be available.   He  then went on  to state that the amount was  always available for  utilization as  working capital and that it was actually utilised during the years.  There was no effective cross-examination of this statement.   However, before the tribunal it was claimed  on behalf  of the respondents that the lower figure  should  be taken  as the actual working capital and that  the  tribunal did.   We  must say that it looks odd  that  the  respondent should  have  produced two figures for  working  capital.for each  year.  We should have expected more positive  evidence on  the  point  which  would  have  shown  one  figure,  for reserves  actually used as working capital  could   only  be represented by one figure.  Though therefore the  accountant did  swear that the amount was used as working  capital  and his  oath was apparently with respect to both  figures,  the respondent  in the end was content to take the lower figure. This  in  our opinion is not the right way of  proving  what reserves  were actually used as working capital  during  the year  and we should expect a firm figure to be given by  the employers for this purpose.  But as. there was no  effective cross-examination  on the point by the appellants, we  would not disallow interest on working capital altogether.  As  we are  remanding the matter we expect  proper evidence  to  be given by the respondent in this connection.     The  next point urged on behalf of the  appellants  with respect  to  the  calculation of  working  capital  is  that investments cannot be taken into account in arriving at  the figure  of  working capital.  Put in -this broad  form   the contention  of the appellant cannot be accepted,  for  there may   be  circumstances in which investments may  have  been used, 47 as working capital while equally there may be  circumstances in which investments may not have been so used, and it  will depend upon the evidence available whether investments  have been actually used as working capital or not.  For  example, where investments at the beginning of a particular year were of a particular kind and the same investments appear at  the end  of the year without any change, it cannot be said  that the  amount invested has been used as working  capital.   We may make this clearer by a hypothetical example.  Suppose at the  beginning of the year the employer has  investments  in government  securities of 3 percent conversion loan  to  the tune  of  20 lacs.  At the end of the year  also,  the  same investment  continues  in the same form, namely,  3  percent conversion   loan   for  Rupees  twenty  lacs.    In   those circumstances  it  cannot be said that this  investment  has been used during the year as working capital.  On the  other hand  where investments have been realised during  the  year and actually used as working. capital, evidence can be given to  show that this has happened and then the investments  so realised and,used as working capital can be taken to be part of  working  capital  for the year.  If  such  a  thing  has happened  the  balance-sheet  will  show  that  though,  for example,  at  the  beginning  of  the  year  the  investment consisted  of 3 percent conversion loan for Rs. 20 lacs  but at the end of the year it consisted of 3 percent  conversion loan  for Rs. 5 lacs, which would show that Rs. 15 lacs  out of  investments,  might have been used as  working  capital. Similarly where investments are pledged as security for  the purpose  of business, even though there may be no change  in them, that may show that part of the investments so  pledged has  been  used as working capital. Therefore  the  question whether  investments  have  been actually  used  as  working

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capital  is a question ’of fact; whether they have  been  so Used   will  have  to  be  shown  by  evidence,   oral   and documentary,  in  support  thereof.   In  the  present  case however it seems to 48 have been assumed by the tribunal that all investments  have been used as working capital and this in our opinion was not correct.  The matter will therefore have to go back to  find out exactly what investments were used as working capital.     The  last  argument  under this  head  is  that  certain advances  have  also  been taken  into  account  as  working capital  and  that this is not permissible. Here  again  the contention  of  the appellants cannot be  accepted  in  this broad form.  There may be some advances which may have  been used as working capital while there may be others which  may not  have been so used. Where advances have been  given  for obtaining  raw materials etc., they would certainly be  part of  the  amount used as working capital. On the  other  hand where  advances are purely loans and have not been  realised during  the year and the same advances which appear  at  the beginning  of the ,year continue at the end of the  year  to the same person and the advances have not been made for  the purpose  of business, such advances cannot be taken to  have been  used as working capital.  Further, as in the  case  of investments, if advances have been realised during the  year and  the  amount  realised has then  been  used  as  working capital, evidence will have to be given to show this. In the present case however ,it seems that advances have been taken en  bloc as part of working capital and this in our  opinion is not correct.      The  result therefore is that there will have to  be  a remand  on the question of determining working  capital  and the  interest  to  be  allowed on it in  the  light  of  the observations we have made herein. Re. (4). We  now come to the question of rehabilitation. It is  urged that the tribunal had occasion to consider 49 the  question  of  rehabilitation  in  connection  with  the respondent-mills  for the year 1954-55, i. e.,  just  before the  four  years  now in dispute.   On  that  occasion,  the tribunal   found  that  the  total  amount   necessary   for rehabilitation was Rs. 43.39 lacs per year; but in the  four years  in dispute the tribunal has increased this amount  to Rs.63.56 lacs in 1955-56 and Rs. 67.66 lacs in 1956-57.   As for the years 1957-58 and 1958-59 the tribunal has found the rehabilitation  amount  only for the pre-1939 block  as  Rs. 64.59 lacks and Rs. 64.71 lacs respectively. The  appellants contend  that  these  calculations are  incorrect  and  that rehabilitation  calculations  are  a  long term  matter  and there  was no reason for the rehabilitation amount to go  up as compared to that for 1954-55 as there was no  appreciable change  in  prices  during  the four  years  in  dispute  as compared  to  the prices in 1954-55.  It  is  conceded  that rehabilitation may have increased slightly on account of new blocks which came into existence after 1954-55.  Even so  it is urged that the tribunal has fallen into two basic  errors and that is how it came to arrive at such an inflated figure of  rehabilitation for the years  in dispute as compared  to the  year 1954-55.  The first base error is said to be  that the   tribunal  did not take into account what  had  already been  allowed  for  previous years  as   rehabilitation  and proceeded to calculate rehabilitation as if nothing had been allowed  for rehabilitation for previous years, which  would naturally have  the  effect of  inflating the rehabilitation

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amount  year by year.  The second basic error is said to  be that  the tribunal did not give credit for all the  reserves available for rehabilitation as it should have done with the result that the amount of rehabilitation found by it  became inflated.     We  are of opinion that there is force in this  argument and the tribunal has undoubtedly fallen into error  on  both counts.  In the first place 49 determination  of rehabilitation is a long term  affair  and once it has been determined it cannot  go on increasing from year to year except in case of a sudden appreciable rise  in prices  or on account of new blocks being added followed  by further rise of prices after the purchase of the new blocks. As  was pointed out in the Associated Cement Companies  case (1),  the tribunal has before awarding the proper amount  in respect  of rehabilitation, to make  deduction,  (firstly)on account  of  break-down   value, (secondly)  on  account  of depreciation  and general liquid reserves available  to  the employer other than those reasonably earmarked for  specific purposes,  and  (thirdly) on account of  the  rehabilitation amount  which  may  have been allowed  to  the  employer  in previous  years  and  remained unused in  the  meantime.  It appears  that in the year 1954-55 the net figure arrived  at for rehabilitation for  that  year  was Rs. 33.39 lacs after allowing  depreciation  for that year and as  the  available surplus  after  deducting other prior charges was  only  Rs. 24.46  lacs,  the tribunal did not grant any  bonus  to  the workmen.   Even  so  h  is  remarkable  that  out   of   the rehabilitation amount of Rs. 33.39 lacs for that year a  sum of  Rs. 24.46 lacs was  left  in  the hands of the  employer as  rehabilitation  amount.   The  tribunal  seems  to  have ignored  this fact altogether in calculating  rehabilitation amount for the years in dispute. As was pointed out  in  the Associated     Cement   Companies   case   (1),   all    the rehabilitation   amount which may have been allowed  to  the employer  for rehabilitation in previous years but  remained unused  for rehabilitation in the meantime, has to be  taken into  account  in  arriving  at  the  amount  required   for rehabilitation.  The same result can be  arrived at in other way,  provided there is no  appreciable .rise in  price,  by taking the rehabilitation amount  once arrived at and adding to it such amounts as may be due for rehabilitation for  new blocks  and also such amounts as may not have been  left  in the hands of (1) [1959] S.C. R. 925. 51 the  employer in the previous years,  because the  available surplus  in his hand after allowing all other prior  charges was  less than the rehabilitation amount found due.  In  any case  the  tribunal was certainly wrong in not  taking  into account the rehabilitation amounts allowed in previous years in  working out the rehabilitation amount for the  years  in dispute.     The second error into which the tribunal fell was in the matter  of  deducting  the  amount  available  from   liquid reserves other than those  ear-marked for specific purposes. What  the  tribunal  did  in this case was that it  did  not properly  take  into account the liquid  reserves  available and deduct them from the rehabilitation amount found due  by it.   The tribunal seems to have held that whatever sum  was working  capital  could  not  be  deducted  from  the  gross rehabilitation  amount  found by  it and  reliance  in  this connection   was  placed on  the judgment of this  Court  in Khandesh Spg. & Wvg. Mills Co. Ltd. v.  The Rashtriya  Girni

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Kamgar Sangh Jalgaon (1).  In that case the employer claimed that  the balance-sheet disclosed that the  entire  reserves had  been  used  as working  capital and  consequently  such reserves   should  not be excluded from  the  claim  towards rehabilitation.   It was however held that the employer  had failed  to  prove  that reserves had in fact  been  used  as working capital and as such the amount was rightly  deducted by   the  industrial  court  from  the  amount   fixed   for rehabilitation.  In our opinion  the ratio of that case  has been   misunderstood.  That case does not lay down that  all the  amount on which interest is allowed as working  capital cannot  be  deducted from the  gross  rehabilitation  amount found by  the  tribunal to arrive at the net  rehabilitation amount.  What that case decided was that before a particular reserve could be said to be not available for rehabilitation it must be established that it has been reasonably earmarked for a binding purpose or the whole or a (1) [1960] 2 S. C. R. 841. 52 part  of it has been used as working capital and  that  only such  part  of the reserves coming under either of  the  two heads  can be said to be not available  for  rehabilitation. This  means  that if any reserve has been  earmarked  for  a particular purpose which is binding and must be carried out, for example, an amount kept in reserve for paying debentures when  they  fall due, it cannot be deducted from  the  gross rehabilitation   amount.  Further when  that case lays  down that  the  whole or apart of the reserves  which  have  been actually  used as working capital cannot be   deducted  from the gross rehabilitation amount it does not mean that  money which  may  be available for use as working capital  in  the next   year   cannot  also  be  deducted  from   the   gross rehabilitation  amount.  The position would be clear  if  we indicate  how  generally  the  amount of working capital  is arrived   at.  What is usually done is to take into  account the  liquid  assets  of  various  kinds  available  at   the beginning of the relevant year and the total of such  assets available  at  the beginning of the year  is  considered  as working capital for that year, if there is evidence that  it has been actually used during the year.  But when we come to the end of the year and look at the balance sheet we have to find out the liquid assets available at the end of the  year from  which the amount available as working capital for  the next  year  may  be  arrived  at.   But  the  liquid  assets available  at  the end of the year will usually  be  of  two kinds;  firstly  there will be cash assets  in  the  various reserves  and secondly there will be assets in the shape  of raw  materials etc. and both together become  the  available working  capital  for  the next year  subject  to  necessary adjustments  and  also subject  to the evidence   that  they were   actually used as working capital. Now, what was  laid down in the Khandesh Spg. & Wvg. Co.s case (1), when it  was said that the amount which had been actually used as working capital could not be deducted from the  gross rehabilitation amount was that (1) [1960] 2 S.C.R,841. 53 that  part of the working capital Which is in the  shape  of raw  materials etc. could not be deducted.  The  distinction which we have pointed out did not arise for consideration in that  case, for it was held in that case that there  was  no evidence to show that any part of such reserves had in  fact been used as working capital and this Court upheld the award of  the industrial court deducting the entire reserves  from the gross rehabilitation amount.  The matter will be clearer

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if  we take a concrete example. Take the year  1955-56.  Now the  working capital is generally arrived at by finding  the liquid  reserves  available on April 1, 1955.  These  liquid reserves  may  be in the form of reserves of  various  kinds i.e.   depreciation  reserve,   general   reserve,   renewal reserve,  and  so on, and also in the form  of  investments, advances and raw materials etc. in stock.  All these have to be  taken  into account in arriving at the  working  capital after  necessary adjustments.  As we have  already,  pointed out, the amount of working capital thus arrived at if  there is evidence that it was actually used as working capital for the year may be allowed interest in accordance with the Full Bench  formula.  But then we come to the end of the year  i. e.  March 31, 1956.  At that time we have again to see  what the  position of the reserves is. The reserves may be  again in the form of cash reserves or investments or advances  and also  in the form of raw materials etc. From these  reserves working capital for the next year may have to be  calculated and  if  evidence is given that it has been  actually  used, interest may have to be allowed on it; but that is no reason for not deducting that part of the reserves which is in  the shape of cash reserve, investments or advances on the ground that  it is not available for rehabilitation, as it  may  be used as working capital for the year 1956-57. Only that part of the reserves which is in the shape of raw materials  etc. or  which  is  car-marked as  indicated  already  cannot  be deducted for purposes of rehabilitation, for it will not  be available for that purpose and 54 would be consumed or sold during the course of the next year or used for a specific purpose.  But all other reserves  are available  for rehabilitation on March 31, 1956 and have  to be  deducted  from the gross rehabilitation amount  for  the year.   The tribunal in this case however, has not  followed this  principle  on a misappreciation of the effect  of  the judgment  of this Court in Khandesh Spg. & Wvg.  Co.’s  case (1).  All that that decision lays down is that that part  of the  reserves which go to make up the working capital  which is  in the shape of raw materials etc. or earmarked  reserve will  not be deducted from the gross-rehabilitation  amount; it does not lay down that all cash reserves in the shape  of depreciation  reserve,  general  reserve,  renewal   reserve and so on and also in the shape of investments and  advances cannot  be deducted from the gross rehabilitation amount  as they  may be used as working capital next year.  This  means that  the  tribunal has to  recalculate  the  rehabilitation amount due in view of what we have said above.     In  view of the fact that the adjudication of the  claim for  bonus has already been delayed, we direct the  tribunal to recalculate the available surplus in accordance with  the observations made in this judgment after giving  opportunity to   the parties  to adduce further evidence and submit  its findings to this Court within three months of the receipt of the  record  by it.  When the findings of the tribunal  have been  received,  notice  will be given to  parties  to  file objections  if  any within ten days of the  receipt  of  the notice  and thereafter the appeals will be listed for  final disposal.                            Case remanded. (1) [1960] 2 S. C. R.841. 55