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PETITIONER: DELHI CLOTH & GENERAL MILLS CO.  LTD.

       Vs.

RESPONDENT: WORKMEN

DATE OF JUDGMENT03/09/1971

BENCH: MITTER, G.K. BENCH: MITTER, G.K. VAIDYIALINGAM, C.A. REDDY, P. JAGANMOHAN

CITATION:  1972 AIR  299            1972 SCR  (1) 594  1971 SCC  (2) 695  CITATOR INFO :  F          1972 SC 471  (30,31)  R          1972 SC2195  (10)  F          1973 SC2300  (15)

ACT: Payment  of Bonus Act, 1965, s. 6-Whether on the  facts  and circumstances  of  the  case, the workers  are  entitled  to higher bonus.

HEADNOTE: The  appellant  is a public limited company  owning  various industrial  units including the Delhi Cloth  Mills  (D.C.M.) and  the Swatantra Bharat Mills (S.B.M.). Although  separate balance-sheet and profit and loss accounts were prepared for each of these two mills, their workmen have always been paid bonus  calculated on the basis of pooled profits of the  two units  treating them as one unit.  Disputes and  differences having  arisen  as  regards payment  of  bonus  between  the workers  of  these two units, the following  questions  were referred to the Tribunal for adjudication. (i)Whether   in  calculating  the  bonus  table  for   the accounting year in question, the allocation separately  made by the company towards capital and reserves of the two units (D.C.M. and S.B.M. units) is fair and reasonable. (ii)Whether  workmen  of these two mills  are  entitled  to bonus at  higher rate for the said accounting year.   . On  the basis of documents filed both by the management  and the  workers,  it appeared that according  to  the  company, direct  taxes which have to be deducted far  computation  of allocable  surplus  for payment of bonus  was  much  higher, while according to the workers, direct taxes should be  much less.   If  the  computation of the management  were  to  be accepted, the rate of bonus to each employee would remain at 7.30 per cent, while according to workers, the rate of bonus would  be  16.64%. The Tribunal however, gave its  award  in favour of the workers.  Allowing the appeal, HELD : The direct taxes under s. 6(c) of the Bonus Act  were properly  quantified  by  the  Appellant  company  in  their calculation  and the rate of Bonus to each employee is  7.31 per cent of their annual wage bill and not 16.64 per cent as claimed  by  the workers.  The bonus Act, being  a  complete

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Code,  the provisions thereof must have effect of their  own force.   So  far as the two mills are concerned,  the  gross profits must be computed in terms of the second schedule  to the  Act  and the available surplus mentioned in  s.  5,  in terms  of  ss.  6  and 7 of the  Act.   Where  a  branch  or undertaking  has to be taken as an Establishment  under  the proviso  to  s.  2 for the purpose of  the  Act,  the  gross profits, prior charges, the available 595 surplus  and the allocable surplus have all to be found  out nationally   applying   the  fiction  to   the   branch   or establishment.   When  the fiction is to  have  effect  with regard to all other matters, it is not possible to hold that for  the purpose of computation of direct tax, it has to  be given  a  go-by and the actual realities  of  the  situation taken  note of only in respect of the amount of tax  payable under  the Income-tax Act for all the  establishments  which have to suffer taxation together and thereby to displace the fictional or notional liability. [604 C, 605 E, 607 A] Metal  Box  Co.  v.  Workmen, [1969]  1  S.C.R.  750,  Shree Meenakshi  Mills v. Their Workmen. [1958] S.C.R.  878,  M/s. Tulsidas  Khemji v. Their Workmen, [1963] 1 S.C.R.  675  and M/s.   Alloy  Steel Project v. ’The Workmen, [1971]  1  S.C. Cases 536, referred to.

JUDGMENT: CIVIL APPELLATE JURISDICTION : Civil Appeal No. 622 of 1967. Appeal  by special leave from the award dated  February  28, 1967   of  the  Delhi  Administration   Special   Industrial Tribunal, Delhi in Reference No. 53 of 1966. G.   B.  Pai,  D.  R. Thadani and S.   S.  Sharma,  for  the appellants. M.   N.  Phadke,  S.  S. Khanduja, V. P.  Kohli  and  Lalita Kohli, for respondents Nos. 1 (c) and 3 (c) (i). M.K. Ramamurthi and Vineet Kumar, for the respondent  No. 1 (a). O. P. Sharma and K. S. Suri, for respondent No. 1 (b). The Judgment of the Court, was delivered by Mitter, J. The only point of dispute between the parties  to this appeal by special leave from an order of an  Industrial Tribunal relates to the quantum of direct ’taxes  deductible under s.  6 of the Payment of Bonus Act, 1965. The  appellant is a public limited company owning  and  run- ning various industrial units situate at different places in India.   These are engaged in the manufacture  of  different kinds  of articles such as cotton textiles, artificial  silk fabrics,  sugar, industrial alcohol,  vanaspati,  chemicals, fertiliser, polyvinyl chloride and rayon tyrecord etc.   Two of these units i.e., The Delhi Cloth    Mills    and     the Swatantra  Bharat  Mills  are  cotton  textile  mills   each registered as a factory under the Factories Act.  The  award under  appeal  relates  to  these  two  mills  alone.    The appellant prepares 596 and publishes one consolidated balance sheet and profit  and loss account of the company showing the final results of the working  of  all  the units for its  shareholders.   It  had however  for  many  years  past,  prepared  and   maintained separate  balance  sheets and profit and loss  accounts  for some  of its units individually and some  grouped  together. Although  separate  balance  sheets  and  profit  and   loss accounts   were  prepared  for  each  of  these  two   mills (hereinafter referred to as D.C.M. and S.B.M. for  abbrevia-

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tion)  their workmen have always been paid bonus  calculated on  the  basis of pooled profits of the two  units  treating them  as  one unit.  This is borne out by the award  of  the Tribunal in paragraph 29. The reference herein was made by notification dated March 4, 1966  under  ss.  10(1)  (d) and  12(5)  of  the  Industrial Disputes  Act for adjudication of several specified  matters of which the first two read as follows               1.Whether  in calculating the bonus  table               for  the accounting year ending 30-6-1965  the               allocation separately made by the Delhi  Cloth               and General Mills Co. Ltd. towards the Capital               and  Reserves  of the Delhi  Cloth  Mills  and               Swatantra  Bharat Mills, the two units of  the               Company, is fair and reasonable ? If not, what               directions are necessary in this regard ?               2.Whether  the workmen of these Mills  are               entitled to bonus at a rate higher than 6  per               cent  of  the wages for  the  accounting  year               ending 30-6-1965 ? If so, what directions  are               necessary in this regard ? After prolonged proceedings before the Tribunal a settlement was arrived at between the Management and the Labour  Unions which  were parties to the reference and  agreed  directions given in ;accordance therewith in regard to issue No. 1 were as follows               1.Balance-sheets of D.C.M. and S.B.M. will  be               taken  together for calculation  of  available               surplus  in accordance with the  formula  laid               down in the Payment of Bonus Act, 1965.               2.Interest has been charged in the  profit               and loss account of D.C.M. and S.B.M. units of               the head-office               597               current  account.   Hence, no return  will  be               claimed thereon.               3.Interest  has not been charged on the  fixed               capital expenditure accounts and the  gratuity               reserves,  appearing in the balance sheets  of               the  D.C.M.  and S.B.M. therefore,  return  on               such amounts will be claimed.               4.The  following  method will be  followed  in               making  a  claim for return on  the  following               amounts :               (a)   The,  fixed capital expenditure  account               in  the.  D.C.M. and S.B.M. as represented  by               the  written  down value of the  Fixed  assets               appearing  in the balance sheet of  these  two               units will be treated as paid up share capital               of  the company allocated to and  invested  in               these two units and return at the rate of  81%               or  as provided in the Payment of  Bonus  Act,               1965  from  time.  to  time  will  be  charged               thereon as provided under the Payment of Bonus               Act, 1965.               (b)   The gratuity reserves of these two units               will be treated as reserves and return at  the               rate of 6% will be charged thereon as provided               under the Payment of Bonus Act, 1965.               5.    The method and basis of casting  balance               sheets  will  not be unilaterally  altered  or               changed.               6.The, above method of charging return on paid               up share capital and reserve of the above  two               units will be followed in future also.

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Thereafter  the  parties filed a large number  of  documents waiving formal proof thereof.  Those, filed on behalf of the Management were Exs.  M to M-352 while three other  opposite parties  filed  some documents each.  On the  basis  of  the documents before the Tribunal the Management and the workers made their respective calculations which were summed up in a chart,  a  copy  whereof was handed over to  us  by  learned counsel for the appellants.  The same reads as follows:-- 598           CHART Management M-330 (paper Book p.200) ------------------------------------------------------------ Ref. of Bonus Act     Details       Ext      DCM     SBM ------------------------------------------------------------ Gross Profit        As per Ext.      1       107.14   48.93 Schedule 2          deductions Prior charges       Statutory depreciation S.6(a)    (b)              Development rebate  2    (c)              Direct taxes        3                     (a) Income tax      3                     (b) Surtax    (d)              RETURN                     (a) Dividend on Pref 4                     capital                     (b) on equity capital 4                     (c) on reverse        4 Available surplus S.5 Allocable surplus S.2    (a) Payables as bonus                           60% Annual wage bill of all the eligible of       5.201.78 plus 101.54 employees Rate of bonus to each employee                   Workers W-84 (Paper Book p.213) ----------------------------------------------------------- Total                                               Lakhs ------------------------------------------------------------ 156.09 Gross Profit  .................. ..         156.09     DEDUCTIONS 35.83 Depreciation u/s 6(a)   . . . . . . .        35.83       Development rebate u/s 6(b). . . . . .       2.72 2.72  Direct taxes u/s 6(c) as in EX-M-15          10.09       Return on capital under s.6(d)               22.47 52.24  5.48 27.17 1.30 118.74 Available surplus is  . . . . . . . .. . .. 84.98        Allocable surplus is 60% of Rs.84.98        50.99 37.35 22.40 306.32  Annual wages  . . . . . . . . . . . . . .  306.32 7.31% Rate of bonus   . . . . . . . . .. . . . . . 16.64% ----------------------------------------------------------- 599 The above brings out the wide divergence between the parties as  to  the  figure  of  direct  taxes.   According  to  the appellant  direct  taxes  which  have  to  be  deducted  for computation of allocable surplus for payment of bonus are  : Rs.  52-24 lakhs by way of income-tax and Rs. 5-48 lakhs  by way  of  surtax  making a total of Rs.  57-72  lakhs,  while according  to  the calculation of the workers  direct  taxes should  be no more than Rs. 10-09 lakhs on the basis of  Ex.

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M-  15,  one  of the documents produced  by  the  Management itself.   If the computation of the Management is  accepted, then the allocable surplus in terms of s. 2(4) of the  Bonus Act  is  Rs.  22-40  lakhs and the rate  of  bonus  to  each employee is 7.31 per cent while according to the computation of the workers the allocable surplus is Rs. 50-99 lakhs  and the rate of bonus should be 16.64%. In order to appreciate the viewpoints of the two parties, it is necessary to refer to some provisions of the Act.  It  is unnecessary to state that before the enactment of the  Bonus Act of 1965 bonus used to be awarded by Industrial Tribunals whenever there was a dispute between the Management and  the workers,  by  applying  the Labour Appellate  Tribunal  Full Bench formula  formulated  as far back as 1950 and  approved of and explained in several decisions of this Court. The Act of 1965 was passed for   creating a statutory liability "for payment   of   bonus   to  persons   employed   in   certain establishments and for matters connected     therewith". Subject to certain exceptions it was made applicable   to every factory or other establishment in which twenty or more persons  were  employed  on any  day  during  an  accounting year.The  accounting  year in the present case is  1st  July 1964  to  30th  June, 1965. Under s.  8  every  employee  is entitled to be paid      by  the employer in  an  accounting year, bonus in accordance with     the  provisions  of   the Act. The amount of bonus is to be specified  percentages  of the allocable surplus of the establishment which  is defined in s. 2 sub-s. (4) of the Act. Establishments may be   of two kinds. They are either establishments in private sector     or establishments  in private sector. Although  ’establishment’ by   itself has not been defined in the Act separately, s. 3 gives a clue   to the meaning thereof. The said section runs as follows :               "Where an establishment consists of  different               departments  or undertakings or has  branches,               whether    situated  in the same place  or  in               different places, all such     departments  or               undertakings or branches shall be treated     as               parts  of  the  same  establishment  for   the               purpose of computation of bonus under this Act               :               Provided that where for any accounting year a     se parate               balance-sheet and profit and loss account are               600               Prepared and maintained in respect of any such               department  or  undertaking or  branch,  then,               such department or undertaking or branch shall               be treated as a separate establishment for the               purpose of computation of bonus under this Act               for  that  year,  unless  such  department  or               undertaking or branch was, immediately  before               the  commencement  of  that  accounting   year               treated  as part of the establishment for  the               purpose of computation of bonus." Gross  profits of each establishment have to be computed  in terms  of s. 4 which in its turn refer to two Schedules  the first to be applicable to a banking company and the other to any other case.  After the ascertainment of gross profits s. 5 lays down the method of computation of available  surplus. Before  the  amendment  introduced  by Act  8  of  1969  the available  surplus in respect of any accounting year was  to be the gross profits for the year after deducting  therefrom the  sums  referred  to  in s. 6.  S.  6  provided  for  the deduction of certain amounts from the gross profits as prior

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charges.  These are, namely, (a) any amount by way of depre- ciation admissible in accordance with the provisions of sub- s. (1) of s. 32 of the Income-tax Act or in accordance  with the  provisions of the agricultural income-tax law,  as  the case  may be (the provision is irrelevant for our  purpose); (b)  any amount by way of development rebate or  development allowance which the employer is entitled to deduct from  his income  under  the  Income-tax  Act;  (c)  subject  to   the provisions  of  s. 7 any direct tax which the  employer  is liable  to  pay for the accounting year in  respect  of  his income,  profits  and gains during that Year; and  (d)  such further sums as are specified in respect of the employer  in the Third Schedule.  Before the amendment of the Act in 1969 s. 7 read as follows :-               "For  the purpose of clause (c) of section  6,               any,  direct tax payable by the  employer  for               any  accounting  year shall,  subject  to  the               following  provisions,  be calculated  at  the               rates applicable to the income of the employer               for that year, namely :-               (a)   in calculating such tax no account shall               be taken of---               (i)   any  loss  incurred by the  employer  in               respect  of any previous accounting  year  and               carried  forward  under any law for  the  time               being in force relating to direct taxes;               (ii)  any  arrears of depreciation  which  the               employer  is entitled to add to the amount  of               the allowances for 601               depreciation for any following accounting year               or years under subsection (2) of section 32 of               the Income-tax Act;               (iii) any exemption conferred on the  employer               under  section 84 of the Income-tax Act or  of               any  deduction to which he is  entitled  under               sub-section (1) of section 101 of the Act,  as               in  force immediately before the  commencement               of the Finance Act, 1965;               (b)   where  the employer is a religious or  a               charitable institution to which the provisions               of  section 32 do not apply and the  whole  or               any  part  of its income is  exempt  from  tax               under  the Income-tax Act, then, with  respect               to  the income so exempted,  such  institution               shall  be treated as if it were a  company  in               which the public are substantially  interested               within the meaning of that Act;               (c)   where the employer is an individual or a               Hindu  undivided  family, the tax  payable  by               such  employer under the Income-tax Act  shall               be  calculated  on the basis that  the  income               derived  by him from the establishment is               his only income;               (d)   where  the  income  from  any   employer               includes  any profits and gains derived  from,               the export of any goods or merchandise out  of               India and any rebate on such income is allowed               under  any  law for the time  being  in  force               relating  to  direct taxes, then,  no  account               shall be taken of such rebate;               (e)   no account shall be taken of any  rebate               (other than development rebate or  development               allowance)  or credit or relief  or  deduction               (not  hereinbefore mentioned in this  section)

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             in the payment of any direct tax allowed under               any  law for the time being in force  relating               to  direct taxes or under the relevant  annual               Finance  Act,  for  the  development  of   any               industry." Section 3 is the key to the Act in that it fixes the res  or the  property which is to provide the allocable surplus  for the distribution of bonus in terms of the Act.  This must be an  establishment and a question directly arises when  there are a number of establishments in common ownership as to how the  allocable surplus is to be found out.  If s. 3  had  no proviso to it, all departments, undertakings or branches, be they  complete factories or not, for turning out  commercial products  under  common ownership could be  treated  as  one establishment  for the purpose of computation of  ’bonus,  A company which is a legal entity 602 owning  and running factories of diverse characters  whether situate  at  the same place or located at  different  places would  in such eventuality, form one establishment  for  the purpose  of  the Act.  The proviso to  the  section  however shows  that  the  legislature intended that  each  of  these factories  is to be treated as a separate establishment  for the  purpose of computation of bonus if a  separate  balance sheet  and profit and loss account were prepared in  respect thereof  unless such a factory was, immediately  before  the commencement  of the accounting year, treated as a part  and parcel  of  the company i.e., the establishment.   In  other words,  if  different units or branches or  departments  had been  treated separately for the purpose of  computation  of bonus  and  separate  balance  sheet  and  profit  and  loss accounts had been prepared in respect thereof, they were not to lost their separate identity as establishments because of the  main provision of S. 3. Once it is ascertained  that  a branch,  department  or  a factory is  an  establishment  by itself under the Act, sections 4 to 7 are to have effect  in respect  of  that establishment by  themselves  without  the impact  or  connection with other branches,  departments  or factories  even  if  they subserve a  common  cause.   Gross profits ,of such an establishment like the two mills  before us  would  have  to be calculated in  terms  of  the  Second Schedule  to the Act by taking the net profit as per  profit and  loss  account and adding thereto  the  various  amounts therein  mentioned  and deducting the amounts  like  capital receipts,  profits  of  and receipts  relating  to  business outside India etc.  The gross profits to be computed for the purpose  of  bonus would not be the same as to  be  computed under the Indian Companies Act or the Income-tax Act.  Under S. 5 of the Act the available surplus in respect of the  two units  would  be the gross profits computed under  S.  4  as reduced  by the prior charges mentioned in sub-cls.  (a)  to (b)  of  section 6. All these amounts i.e.,  gross  profits, available  surplus  and sums deductible from  gross  profits would  be  notional amounts in that they would  not  be  the amounts which would be computed under the Companies Act  for submission  to the shareholders or for assessment under  the Income-tax Act to the taxing authorities.  ’S. 7 cl. (a)  of the Act further illustrates the point that the direct  taxes which are to be deducted as prior charges are not to be  the same  as  would be assessed by  the  income-tax  authorities under  the Income-tax Act.  That the calculation  of  direct taxes  would  be on a notional basis is also  emphasised  by cls. (b), (c), The  net  result seems to be that the  legislature  intended that  subject  to  the  express  provisions  mentioned,  the

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employees  of a particular establishment should be  entitled to  bonus under the, Act without any consideration to  facts or matters not mentioned 603 in  the  Act.  The employer is to be treated as  a  separate juristic  person liable to pay bonus to the employees as  if the  establishment  was his only venture, no matter  how  he fares  in his other ventures.  Even if the sum total of  his activities in respect of his ventures resulted in a loss for the  accounting year, he would have to pay bonus subject  to the  maximum  specified  in section 10 of the  Act  to  each employee of the establishment which was making profits.  The profits or losses of the other establishments, although they may form part of the composite whole in the accounting to be done  under the Companies Act or the assessments to be  made under   the  Income-tax  Act,  would  be  wholly  alien   to consideration and computation of bonus of the profit  making establishments in terms of the Act. The  balance  sheet and the profit and loss account  of  tie Delhi  Cloth and General Mills as on 30th June 1965 and  for the year ended 30 June 1965 were Exs.  M-5 to M-7 before the Tribunal while Exs.  M-8 to M-10 are the corresponding docu- ments  for the Swatantra Bharat Mills.  There is no  dispute between  the  parties  with regard to the  figure  of  gross profits in terms of the Second Schedule to the Bonus Act  as shown  in the main chart Ex.  M-330 of the Management.   The gross profits for the Delhi Cloth Mills was Rs. 107.14 lakhs and  that  for  Swatantra  Bharat  Mills  Rs.  48.95   lakhs totalling  Rs. 156-09 lakhs.  There is also no dispute  that the  statutory depreciation in terms of s. 6(a) of  the  Act was  Rs.  17,52,048  for  the  Delhi  Cloth  Mills  and  Rs. 18,30,969 for Swatantra Bharat Mills the total whereof comes ’to  Rs.  35.83 lakhs.  The corresponding  figures  for  the development rebate of the two mills add up to 2-72 lakhs but whereas according to Ex.  M-330 the direct tax i.e., the sum of,  income-tax  and surtax in respect of  these  two  units should  be Rs. 52.24 lakhs and Rs. 5.48 lakhs totalling  Rs. 57.72  lakhs, the employees claim that the figure should  be no higher than Rs. 10.09 lakhs in terms of Ex.  M- 15. It  is well known that under the Indian Income-tax  Act  the total  profits and gains of a business are to be worked  out in terms of s. 28 of the Income-tax Act, 1951.  Under s.  29 the  income  referred  to  in s. 28 is  to  be  computed  in accordance with the provisions contained in ss. 30 to  43-A. S. 30 shows what reductions are to be allowed in respect  of rent, rates, taxes etc. for premises used for the purpose of a  business  or  profession.  S. 31  specifies  the  amounts deductible in respect of repairs and insurance of  machinery plant   and furniture used for the purpose of the  business. S. 32 deals with depreciation allowable under the Income-tax Act.   It  contains  elaborate  Provisions  as  to  how  the depreciation  is  to  be worked out.   S.  33  provides  for computation of development rebate in respect of the plant or machinery. 604 S.   33-A  provides  for  development  allowance.   S.  33-B provides for computation of rehabilitation allowance.  S. 34 lays  down the conditions for the allowance of  depreciation and  development  rebate.  Ss. 35, 35-A, 35,B, 35-C  and  36 provide  for special allowances.  When the total  income  is ’ascertained   after  providing  for  the  many   allowances specified  in the Act, income-tax is charged in  respect  of the  total income of the previous year or previous  year  as the  case may be, at rates laid down in the Finance Act  for the  relevant,  year.   The Companies  Act  however  is  not

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concerned  with  any  other allowance  except  the  one  for depreciation  under  s.  32 of the Income-tax  Act  and  the amounts   deductible  by  way  of  development   rebate   or development allowance under the said Act. It must follow from the above that the liability for  direct tax  under  S. 6(c) must be the one which would have  to  be computed  by principles followed in the Income-tax Act.   In other  words,  the  liability  under s.  6(c)  must  be  the notional  liability of a venture of which the gross  profits are  known and the prior charges by way of depreciation  and development  rebate  and  development  allowance  have  been computed.   The  calculation  of income-tax  in  Ex.   M-330 proceeds on the basis that the gross profits are Rs.  156.09 lakhs and the depreciation and development rebate  allowable under  S. 6(a) and (b) are Rs. 38.55 lakhs leaving a  margin of  Rs. 117.54 lakhs for computation of Incometax,  If  this tax is quantified at 45% of the said balance it comes to Rs. 52.24  lakhs  as  shown  in the  calculation  chart  of  the Management and surtax thereon would be Rs. 5.48 lakhs.   The respondents do not. dispute that the figures for  income-tax and  surtax  would be as shown by the  Management  if  their basic  calculation  is correct; but according  to  them  the Management  must accept the figure given in Ex.  M-15.   Ex. M-15  proceeds on the basis that the total liability of  the company  being  Rs. 16.00 lakhs as shown at page  4  of  the Directors’  report  to  the shareholders  under  the  Indian Companies  Act for the year ended 30th June 1965,  the  same would  be allocable to the two units of Delhi,  Cloth  Mills and  Swatantra  Bharat Mills in the proportion of  Rs.  7.37 lakhs  and  Rs. 2.24 lakhs.  These figures however  have  no bearing on the computation of the liability to tax under  s. 6(c) of the Bonus Act for the two particular units  involved in this case.  It was argued at one stage by the respondents that cl. (c) of     s. 6 is not related to cls. (a) and  (b) of the said section. If that  were  so, there is  no  reason why the tax liability at 45% should     not be calculated on the  whole of the gross profits i.e., Rs. 156.09 lakhs.   Ex M-15 was apparently prepared on the basis that the total tax liability for income-tax purposes of all ’the various  units under the ownership of the Delhi Cloth and 605 General  Mills  Company Ltd. being Rs. 16  lakhs,  Rs.  7.85 lakhs  and  Rs.  2.24 lakhs would  be  attributable  to  the working  results of Delhi Cloth Mills and  Swatantra  Bharat Mills.  If the direct tax liability be as quantified by  the Management  in Ex.  M-330 the available surplus in terms  of s.  5  of the Act is Rs. 37.35 lakhs and  allocable  surplus under  the Act being 60% thereof is to be quantified at  Rs. 23.40  lakhs which works out to 7.31 per cent on The  annual wage  bills  of  all the eligible  employees  totalling  Rs. 306.32 lakhs. The  Act  being  a self-contained  and  self-sufficient  Act except  in  so  far as it refers  to  the  other  enactments therein  mentioned, and in particular the Indian  Income-tax Act,  it becomes irrelevant to consider the  application  of the Full Bench formula of the Labour Appellate Tribunal  for the computation of bonus before the Act of 1965 was enacted. Equally  in  our  view it is unnecessary  to  refer  to  the observations of this Court in The Sree Meenakshi Mills  Ltd. v.  Their  Workmen(1) or to M/s.  Tulsidas Khimji  v.  Their Workmen(2) relied on by learned counsel Mr. Phadke for  some of  the  respondents.  The Act is a complete  Code  and  the provisions thereof must have effect of their own force.   So far as the mills before us are concerned, the gross  profits must be computed in terms of Second Schedule to the Act  and

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the  available surplus mentioned in s. 5 in terms of  ss.  6 and  7 of the Act.  Where a branch or undertaking has to  be taken as an establishment under the proviso to s. 3 for  the purpose  of the Act, the gross profits, prior  charges,  the available  surplus and the allocable surplus have all to  be found  out  by  applying  that  fiction  to  the  branch  or establishment.   When  the fiction is to  have  effect  with regard to all other matters, it is not possible to hold that for  the purpose of computation of direct tax it has  to  be given a go-by and the actual realities of the situation only in respect of the amount of tax payable under the Income-tax Act for all the establishments which have to suffer taxation together  allowed  to  displace the  fictional  or  notional liability. In  the  present case, it so happens that the  bulk  of  the profits  of the company (the Delhi Cloth and  General  Mills Company Ltd. ) came from these two units : some of the other units  suffered losses while still others were  not  equally profit-making.   If  the argument raised on  behalf  of  the work-men  was to be accepted and if it so happened that  the other  units were greater profit-making branches than  these two  units, greater tax liability might fall on these  units thereby  reducing  the  percentage  of  bonus  due  to   the employees of these units as a whole.  That certainly was not the object with which the enactment was passed.  S. 7 (1) [1958] S.C.R. 878. (2) [1963] 1 S.C.R. 675. 606 of  the Act itself shows that the matters extraneous to  the working of the establishment in the particular year were not to be taken into account although they could not be  ignored for computing tax liability under the Indian Income-tax Act. Strong reliance was placed by learned counsel for the appel- lant on the decision of this Court in Metal Box Co. v. Work- men(1).  Counsel for the respondents made valiant efforts to persuade  us to hold that many of the  observations  therein were   obiter  and  as  such  the  case  should  either   be distinguished  or  be not followed as a  precedent  for  the determination of the question before us.  While no doubt the dispute,  in that case was somewhat different from  the  one which  we have to resolve and there are some  distinguishing features in that case, namely, that the Court was not called upon  to  examine the computation of the  figures  of  gross profits  etc.  for an establishment which  came  within  the proviso to s. 3 the observations bearing on the question  of the computation of direct tax under S. 6 (c) of the Act art, certainly in point.  It was pointed out ’there at p. 775 :               "What  s. 7 really means is that the  Tribunal               has  to compute the direct taxes at the  rates               at which the income, gains and profits of  the               employer  are taxed  under the Income Tax  Act               and other such Acts during the accounting year               in  question.  That is the reason why S.  6(c)               has  the words "is liable, for" and the  words               "’income, gains and profits".  These words  do               not,  however,  mean that the  Tribunal  while               computing  direct taxes as a prior charge  has               to  assess the actual taxable income  and  the               taxes thereon." With  respect, we entirely agree with the above  observation and  in  our  view  no useful  purpose  will  be  served  by referring  to the other observations bearing on  a  question with which we are not directly concerned. In  Mls.   Alloy Steel Project v. The Workmen(1)  where  the project  was owned, controlled and managed by  a  Government

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Company,  viz.,  Messrs Hindustan Steel Ltd.,  and  separate balance   sheet  and  profit  and  loss  accounts   of   the undertaking  were maintained, it was held that the claim  of the  work-men that the project was a part of  the  Hindustan Steel Ltd. should be upheld and its employees placed on  the same footing as the other employees of the steel company was rejected  inasmuch as the project which was started  in  the year 1964-65 made no profits right up to the year 1967- 68. (1)  [1969] 1 S.C.R. 750.                (2) [1971]  1  S.C. Cases 536. 607 In the result, we hold that the direct taxes under s. 6  (c) of  the  Act were properly quantified by the  appellants  in their calculation shown in Ex.  M-330 and the Tribunal  went wrong in assessing that liability on the basis of Ex.  M-15. The  award  will  therefore be set  aside  and  modified  to provide  for  bonus being given to the workers at  7.31  per cent  of  their annual wage bill.  The appeal  is  therefore allowed as indicated above, but, in the circumstances of the case, we make no order as to costs.                            ORDER At the suggestion of the Court, the Advocate for the  appel- lant  renewed the offer to pay ten per cent of the wages  of the employees as bonus for the relevant year.  The offer was accepted on behalf of the employees by their Advocates.  The award  will, accordingly, stand modified, and the  provision of ten per cent of wages as bonus be inserted therein.   The payment of bonus will be made before Diwali, 1971. There  will be no liability to pay interest.   Our  judgment having   regard  to  the  agreement  of  the  parties   will accordingly stand modified. S.C. Appeal allowed. 608