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PETITIONER: SHRI AMBICA MILLS LTD.  NO. 1

       Vs.

RESPONDENT: THE TEXTILE LABOUR ASSOCIATION, AHMEDABAD,, AND VICE VERSA

DATE OF JUDGMENT20/12/1972

BENCH: ALAGIRISWAMI, A. BENCH: ALAGIRISWAMI, A. DUA, I.D. VAIDYIALINGAM, C.A.

CITATION:  1973 AIR 1081            1973 SCR  (3) 123  1973 SCC  (3) 787

ACT: Payment  of  Bonus  Act  1965,  Second  Schedule  Item  6(g) -Allowable   deductions  under-Subsidy’   meaning   of-Cash payments   by   way  of  assistance   are   subsidy-Indirect assistance  like  Customs  Drawback and  relate  on  Railway Freight is not ’Subsidy’-Subsidy to be allowable under  Item 6(g) must be by Govt. body or Body Corporate established  by any law for the time being in force-Distinction between Body Corporate established ’by’ law and ’under’ under law-Payment received  for  earlier year must be deemed to be  income  of year of receipt especially where accounts maintained on cash basis.

HEADNOTE: There  was a dispute between the appellant mills  and  their workmen  as  to the bonus payable for the  year  1967.   The dispute was referred to the Industrial Court, Gujarat  under s.  73-A of the Bombay industrial Relations Act. 1946.   The workmen claimed inter alia that bonus should be paid at  the rate  of  6.59% of the annual earnings.  The  Mills  on  the other  had  contended  that bonus was payable  only  at  the minimum rate of 4%.  The Mills in calculating the  available surplus  claimed deductions of certain items  falling  under item 6(g) of the Second Schedule of the Payment of Bonus Act 1965,  as subsidies.  The dispute centred round the  meaning of the word ’subsidy’ in item 6(g) of the Second Schedule to the  Payment of Bonus Act.  Another incidental question  was whether  the  Joint Plant Committee or  the,  Indian  Cotton Mills  Federation was a ’Body Corporate established  by  any law for the time being in force’. HELD  :  (i) The Industrial Court was right in  holding  (a) that  the  word Subsidy’ cannot be confined only  to  those cases where cash payment is made by Government in order that an  industry  may survive, (b) that even  if  assistance  is given  by  way of an incentive it would not cease  to  be  a subsidy  provided  it  is a cash payment  given  by  way  of assistance   and  (c)  that  certain  types  of   assistance particularly those Which are only indirect like rebates etc. should be excluded. [127D] Whether the grant is made to a single establishment or it is granted  on  certain terms which make it  available  to  all

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persons  and  establishments carrying on the  same  industry does not make any difference in,; principle.  The subsidy is received  by the concern or establishment carrying  on  that industry or activity. [129E-F] In  view  of the clear provision in item  6(g)  for  subsidy being  deducted  it was not open to the  Court  to  consider whether  it  was  proper  to deduct  the  subsidy  from  the allocable  surplus.   But  the  word  ’Subsidy’  should   be restricted to the narrowest possible limits and should  take in,  only, direct cash subsidies as contemplated under  item 6(g).   It  cannot cover indirect  assistance  like  Customs Drawback or rebate on railway freights. [13OA-C] The mere fact that the full excise duty and railway  freight is  paid’  in  the first instance and part of  it  is  later refunded should not make           123 124 any difference to the ultimate fact that what is paid by the management   is  A  ,only  concessional  excise   duty   and concessional freight. [130F] Sona  Valley  Portland  Cement Co. v.  The  Workmen,  [1972] L.L.J.,  642 and Bengal Textiles Association v. I.T.  Commr. 1960 A.I.R. 1320, referred to. Accordingly,  while  item I claimed by the  appellant  Mills i.e. the subsidy paid by the Government should be deemed  to be a permissible deduction, items 3 & 4 were not permissible deductions. (ii)  (a)  The  Joint Plant Committee  is  certainly  not  a Government Body.  It seems to be more or less functioning on an  informal basis.  It does not seem to have any  statutory powers.  The decision of the Industrial Court that the  cash paid  by the Body is a deductible item could not be  upheld. Item  2 claimed by the appellant Mills was therefore  not  a permissible deduction. [133C-D] (b)Item 5 claimed by the Company was also not an allowable ,deduction because the Indian Cotton Mills Federation  which made the ,cash payment in this case was not a Body Corporate established  by  any law for the time being in  force.   The contention that the words ’body corporate established by any law’  should  be  deemed to include even  a  body  corporate established under any law i.e. even a company, could ,not be accepted. [133G] Majoar  Sahkari  Bank Ltd. v. M. N. Jujumdar & Anr.  1955  2 L.L.J. 755 applied. (iii)The  amount of Rs. 6873 due for the year 1966  but received (under item 1) in 1967 should also be deemed to  be income for the year 1967. Consolidated  Coffee Estate Ltd. v. Workmen, 1970  2  L.L.J. 576 relied on.

JUDGMENT: CIVIL  APPELLATE JURISDICTION : Civil  Appeal Nos. 2083  and 2084 of 1969. Appeals by special leave from the Award Part-I dated  August 13,  1969 of the Industrial Court, Gujarat in Ref. (IC)  No. 110 .,of 1968. Civil Appeal Nos. 1259 and 1260 of 1970. Appeals by special leave from the Award Part 11 dated August 28,  30, 1969 of the Industrial Court Gujarat  Ahmedabad  in Ref. (IC) No. 110 of 1968. S.-V. Gupte, Bhuoanesh Kumari, O. C. Mathur-, J. B.  Dada- chanii and Ravinder Narain for the appellant. (in C.As. Nos. 2083 & 2084/69) & for respondent (in C.As. Nos. 1259 &  1260 of 70

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). V.M.  Tarkunde,  K.  L. Hathi and P.  C.  Kapur  for  the respondent  (in  C.As.  Nos.  2083  &  2084/69)  &  for  the appellant (in C.As. Nos. 1269 & 1260/70). The Judgment of the Court was delivered by ALAGIRISWAMI,  J. Civil appeals Nos. 2083 and 2084  of  1969 are by the Management, Shri Ambica Mills Ltd No. 1, against the  Award Part I dated 13th August, 1969 and Part II  dated 28th  August,  1969, respectively of the  Industrial  Court, Gujarat in Reference IC No. 110 of 1968.  Civil appeals Nos. 125 1259   and   1260  of  1970  are  by  the   Textile   Labour Association,.   Ahmedabad, representing the workmen  against the same award. Shri  Ambica  Mills  Ltd., Ahmedabad, is  a  public  limited company owning three textile units, viz., Shri Ambica  Mills Ltd.  No.  1 and No. 2 at Ahmedabad, Shri Ambica Mills  Ltd. No. 3 at Baroda and two engineering units, viz., Shri Ambica Tubes  at Vata, and Shri Ambica Machinery  Manufacturers  in the premises of Shri Ambica Mills Ltd.  No. 1 at  Ahmedabad. The  last  unit, i.e., Ambica Machinery  Manufacturers  came into  existence  in the beginning of the  year  1967.   Shri Ambica Mills Ltd. 2 and 3 have entered into an agreement  to pay  bonus  on the lines of Shri Ambica Mills Ltd.   No.  1, Ahmedabad.  All the aforesaid undertakings have been treated as  parts  of the same establishment,  namely,  Shri  Ambica Mills Ltd., for the purpose of computation of bonus. The  dispute  relates to the payment of bonus for  the  year 1967.  The demand for the payment of bonus for the year 1967 was  raised  as a result of notice of change  given  by  the Textile  Labour Association (hereinafter referred to as  the Association)  on  15-7-1968.  The appellant  mills  did  not agree  to the payment of bonus as demanded and  conciliation proceedings  having failed, the dispute was  referred  under Section  73-A of the Bombay Industrial Relations Act,  1946. The  Association requested the Mills Company to furnish  the information  regarding the computation of gross  profits  as well  as  allocable  surplus to enable  the  Association  to calculate  the bonus for the year 1967.  The  Mills  Company supplied  the said information, but it also claimed  certain deductions  from  the  gross  profit  for  calculating   the allocable surplus. In  the statement of claim filed by the Association  it  was submitted that- (a)The  Mills Company should be directed to pay  bonus  at the rate of 6.59% of the annual earnings. (b)The  said  amount should be directed to  be  paid  with interest at the prevailing rate. (c)The  Honble  Court may be pleased to  grant  any  other further relief as it may deem fit. The  deductions claimed by the in calculating the  available surplus  were  of certain items falling under item  6(g)  of the  Second Schedule of the payment of Bonus Act,  1965,  as subsidies.  it  was contended that only 4% bonus  i.e.,  the minimum bonus was payable. 126 The Association accepted the facts and figures furnished  by the Mills Company and the dispute only related to the matter of deduction in respect of an amount of Rs. 32,42,945/-  and whether the whole or any part thereof was subsidy or not. The   amounts   claimed  as  subsidies  consisted   of   the following .Eve different items :-- (1)  Rs. 8,63,194/- Cash  subsidy  on export of steel pipes and  tubes  received from Joint Chief Controller of Imports and Exports, Bombay.

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(2)  Rs. 4,25,233/- Cash  by  way of steel entitlement received from  the  Joint Plant Committee, Calcutta. (3)  Rs. 9,33,213/- Cash by way of Customs Drawback realisation on certain types of pipes received from the Collector of Customs, Bombay. (4)  Rs. 71,754/- Cash  by  way of Railway Freight Rebate paid  by  the  Chief Commercial Superintendent, Western Railway, Bombay. (5)  Rs. 9,49,551/- Export  incentive  on  the  cotton  textile  goods  exported received from the Indian cotton Mills Federation, Bombay. Out  of this total amount, an amount of Irs. 9,72,986/-  re- lates  to  past  years i.e., the year 1965  and  1966,  and, according to the Mills Company that cannot, in any event, be treated as income for the accounting year 1967 to which  the dispute relates. The  Industrial  Court held that the Mills Company  was  en- titled  to deduct the first two items i.e., cash  assistance from  Jt.   Chief Controller of Imports &  Exports,  Bombay, being  Rs.  8,63.194  and  cash  payment  by  way  of  steel entitlement  being Rs. 4,25,233 but not items Nos. 3, 4  and 5.   It  further  directed  the  parties  to’   file   fresh calculation on the basis of its directions in Award Part 1. On  the basis of the above directions the Association  filed the ,calculations reserving its right to appeal.  The  Mills Company  also submitted fresh calculations.  Based on  these calculations  the Industrial Court made an  award  directing the Mills Company 127 to pay 4.53% of wages as bonus to all its employees in the 3 textile units and 2 engineering units. The  dispute  ’thus centres round the meaning  of  the  word ’Subsidy’  found in item 6(g) of the Second Schedule to  the Payment  of  Bonus  Act.   Another  incidental  question  is whether the Joint Plant Committee or the Indian Cotton Mills Federation  is a "Body Corporate established by any law  for the time being in force". The  word  ’Subsidy’  is  not  defined  in  the  Act.    The Industrial Court took into consideration the meanings of the word  ’Subsidy’  given  in  the  (i)  Webster’s  New   World Dictionary,  1962, (ii) Shorter Oxford  English  Dictionary, Vol.  11,  Third Edition, (iii) Chambers  Twentieth  Century Dictionary,  Revised Edition, and (iv) The  Reader’s  Digest Great  Encyclopaedia Dictionary, Vol. 11 (M-Z), and came  to the  conclusion that the word ’subsidy’ cannot  be  confined only to those cases where cash payment is made by Government in  order  that  an  industry  may  survive,  that  even  if assistance  is  given by way of an incentive  it  would  not cease to be a subsidy provided it is a cash payment given by way  of  assistance  and that certain  types  of  assistance particularly those which are only indirect like rebates etc. should be excluded. We find ourselves in agreement with this view. The  various definitions given in the dictionaries in so far as they  are relevant, are as follows : Webster’s New World Dictionary, 1962 ".....a  grant  of  money,  specifically  (a)  ...  (b)   a: government  grant  to  a private  enterprise  considered  of benefit to the public." Shorter Oxford English Dictionary "Help, aid, assistance N. Financial aid furnished by a state or  a public corporation in furthering of an undertaking  or the upkeep of a thing. . . . " Chambers Twentieth Century Dictionary, Revised Edn.

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"Assistance  and in money ... a I grant of public  money  in aid  of some enterprise, industry etc., or to keep down  the price of a commodity. . . " The Reader’s Digest Great Encyclopaedic Dictionary, Vol.  II               (M-Z) "2. Financial aid given by government towards expenses of an undertaking or institution held to 128 be of public utility; money paid by government to  producers of a commodity so that it can be sold to consumers at a  low price    " In  addition our attention has been drawn to the  definition given  in  ’Words and Phrases, Permanent Edition,  Col.  40" where subsidy is described as follows : "A subsidy is a grant of funds or property from a government as of the state or municipal corporation to a private person or  company to assist to the establishment or support of  an enterprise deemed advantageous to the public; a subvention." Reference is made to 60 Corpus Juris. Corpus Juris Secundum, Vol. 83, page 760 gives the following under the heading of Subsidy : "Something, usually money, donated or given or  appropriated by  the government through its proper agencies; a  grant  of funds  or property from a government, as of the state or,  a municipal  corporation,  to a private person or  company  to assist  in  the establishment or support  of  an  enterprise deemed advantageous to the public; a subvention. Pecuniary  premiums  offered by the  government  to  persons enlisting  in the public service, or engaging in  particular industries, or performing specified services for the  public benefit are treated in Bounties." The  emphasis  in  every  one of  these  definitions  is  on something  given  or  donated; indirect  assistance  is  not mentioned. Before  we proceed further, it may be necessary to refer  to the history regarding the place of "subsidy" in the  payment of bonus.  Under what is known as the "Full Bench"  formula, subsidy  will not be a proper deduction in  calculating  the surplus available for payment of bonus.  ’Mere is no  reason on principle why subsidies should be kept out of account  in calculating  the  available sum for payment of  bonus.   The Bonus Commission in its report did not recommend subsidy  as a deductible item.  Schedule 2 to the Bonus Act is really  a copy of the schedule found at page 30-40 of the Commission’s report, with the single addition of item (g) after item 6(f) found  in  the  Commission’s report.   Even  the  dissenting minute to that report did not recommend that subsidy  should be a deductible item; but then the dissenting minute was  on a completely different basis from that of the main report. 129 After   the  report  of  the  Commission,  the   legislation regarding bonus took the form of a Bonus Ordinance where for the  first time we come across item 6(g) in Schedule 2.  The Resolution  of the Government of India which considered  the recommendations  of the Commission’s report and accepted  it subject  to  certain  modifications,  for  the  first   time referred  to  subsidies.   The  particular  sentence  is  as follows: " (ii).................................. Further,  subsidies paid  by  Government  to certain concern like the  Hindustan               Shipyard  should not be taken into account  in               working out the gross profits for the  purpose               of payment of bonus." The Press Note issued by the Government regarding the  Ordi- nance also contained ’a similar statement.  On the basis  of

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these  two  statements and on the basis of an  extract  from Kothari’s  "Economic Guide and Investore Handbook of  India’ where  this  subsidy to the Hindustan Ship Yard,  which  was originally  called the Scindia Steam Navigation Co has  been described,  it had been argued before the Industrial  Court, and  the same argument was repeated before this Court,  that the  subsidy  contemplated  under item 6(g) can  only  be  a subsidy  to  a  particular  concern  or  establishment.   We consider this argument as fallacious.  The reference to  the Hindustan  Shipyard  is merely illustrative.   The  argument based on this that only grants to particular  establishments as such and not grants to any activity which any  establish- ment  can  carry on should be called a subsidy,  is  a  far- fetched  one.   Whether  the  grant  is  made  to  a  single establishment  or it is granted on certain terms which  make it  available to all persons or establishments  carrying  on the same industry does not make any difference in principle. The  subsidy  is received by the  concern  or  establishment carrying on that industry or activity. On  the  other  hand we realize the force  of  the  argument advanced  on  behalf  of Labour that a grant,  even  a  cash subsidy, made in respect of the export of some commodity  or other,  as in the present case, is related to the  commodity itself,  towards  the production of which  both  labour  and capital  have  contributed and, therefore, any part  of  the income  received in respect of that activity should  not  be deducted  in calculating the available surplus, and that  it would  be  unfair  to labour to do so.  The  force  of  this argument  was appreciated and acceded to even by Shri  Gupta appearing  on behalf of the Management.  His sole point  was that  but  for the introduction of item 6(g) in  the  Second Schedule  to  the Bonus Act it would not be open to  him  to contend  that subsidy should be deducted from the  allocable surplus  for  the  purpose  of payment  of  bonus.   But  he contended,  the  Act itself having made  the  provision  for subsidy being deducted 10-63ISuPCI/73 130 it  is  not open to this Court to consider  whether  it  was proper to deduct the subsidy from the allocable surplus.  He argued  that  if  subsidy should not be  so  deductible  the remedy  lay elsewhere and that it was with  the  Legislature and while it would be perfectly legitimate for this Court to recommend  that  the  deduction of  subsidy  should  not  be permitted,  the  subsidy  must be deducted as  long  as  the statute  stands as it is.  We appreciate the  reasonableness of  the  stand.   But we consider that  the  word  ’subsidy’ should  be restricted to the narrowest possible  limits  and should  take in only direct cash subsidies  as  contemplated under  item 6(g).  It cannot cover indirect assistance  like Customs Drawback or rebate on railway freight. It was contended that an assistance is an assistance whether it is direct or indirect and the drawback of Central  Excise and  the rebate on railway freight are indirect  assistance, towards  export,  and  they  should also  be  deemed  to  be subsidy.   As pointed out earlier the overwhelming  view  of the meaning of the term ’,subsidy" is direct payment and not indirect assistance.  Furthermore, if instead of ’allowing a drawback  in Central Excise and a rebate on railway  freight the  scheme of assistance had been on the basis  that  goods exported will pay only half the Central Excise Duty and half the  usual  railway  freight,  this  argument  will  not  be available to the Management.  In that case there would have been  no repayment to the Management of part of the  Central Excise  Duty and part of the railway freight paid by it  and it  could  not have been claimed as a  cash  receipt.   The,

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whole of the Excise Duty and the railway freight  originally paid has been included as an item of expense, thus  reducing the surplus and when part of it is received back it does not stand  to reason that it should not go towards reduction  of the  expenses and consequently increasing the surplus.   The mere  fact that the full excise duty and railway freight  is paid in the first instance ;and part of it is later refunded should  not  make any difference to the ultimate  fact  that what  is paid by the management is only concessional  excise duty  and concessional railway freight and but for the  mode adopted of collecting the full excise duty and full  railway freight  in  the  first instance and refunding  part  of  it later, neither the sums nor the argument would be  available to  the management.  We are, therefore, quite clear  in  our mind  that  the  drawback of Central Excise  and  rebate  on Railway freight should not be deemed to be a subsidy for the purposes  of  this  Act.   The  term  subsidy  cannot  cover concessional rates of excise duty and freight but only  cash payments. We  may,  perhaps  refer  in  this  connection  to   certain decisions  relied  on  by the both sides.   In  Sone  Valley Portland Cement Co. 131 v The Workmen(1) this Court held that apart from legislation an incentive bonus for increase of production,  irrespective of the question as to whether the industry was making profit or not is one that must be introduced by the particular unit of industry, and it would be for the management to fix  what incentives should be given to different departments to  step up  production.   It  was further held  that  an  Industrial Tribunal  would  not  be justified in  holding  that  merely because there has been augmentation in the production labour would  be entitled to make a claim to bonus because of  such increase,  and that labour would undoubtedly be entitled  to revision of wage scales, dearness allowance and other  terms and conditions of service as also profit bonus.  This  deci- sion  is  not, therefore. an authority for  the  proposition that  a  subsidy intended to encourage export could  not  be taken  into  account  for the  purpose  of  calculating  the allocable  surplus.   This decision itself proceeds  on  the basis  that  in calculating the profit  bonus  such  amounts would have to be taken into account.  All that was held  was that  the amount paid as subsidy by itself  could  not  be considered  to be one in which labour would be  entitled  to share. The decision of this Court in Bengal Textiles Association v. I.  T. Commr. 2 ) though it had to consider the  meaning  of the word ’subsidy’ occurring in the Business Profits Tax Act 1947.  would  not be relevant for deciding the  question  at issue.   In that case it was held that the use of  the  word ’bonus’  or  ’subsidy’ connotes that the payment is  in  the nature of a gift, and as the payments in that case were made by the Government to an association to assist it in carrying on  its  business and for the services it was  rendering  to Government,  the payments were not in the nature of a  gift. This  decision was relied on by Mr. Tarkunde  as  supporting his  argument  that a payment made for  a  service  rendered cannot be deemed to be a subsidy.  That is no doubt so,  but in the present case there is no question of any service ren- dered  by the management to :the Government.  The mere  fact that  the  Government is interested in  encouraging  exports and, therefore. offers many incentives for export, of  which any  manufacturer could take advantage, does not  mean  that any   such   manufacturer  is  rendering  any   service   to Government.   These are schemes intended by  the  Government

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for  the benefit of the country and. therefore.  any  person would  be entitled to take advantage of that scheme  and  be entitled   to   subside  or  assistance  promised   by   the Government.  Such payments do not become either payments for service rendered or cease to be subsidy merely on the ground that any number of persons coming under that category, would be entitled to that benefit or payment. (1) [1972] L.L.J. 612 (2) A.T.R. 1960 S.C. 1320. 132 It  was argued by Mr. Tarkunde that if a manufacturer  takes it  into  his head to export all the products  that  he  had manufactured it would mean that all his receipts would be in the form of subsidy, drawback on Central Excise and.  rebate on  railway  freight,  and  if all these  items  are  to  be deducted  from the profits there will be  nothing  available for  distribution  as bonus and that it will  be  unfair  to labour  to  deprive  it  of its share  of  the  income  from products towards the production of which it has made its own contribution.   Nationally  that is possible but  in  actual practice  that is hardly likely.  But it does not,  however, take  away the force of the argument that the  deduction  of subsidies from the total income would be unfair to labour in the matter of payment of bonus.  As we have already  pointed out the remedy lies with the Legislature.  What prompted the Government  to include item 6(g) in the Second  Schedule  to the Bonus Act we have no way of knowing. We  thus come to the conclusion that only direct  cash  pay- ments  should  be deemed to be subsidies  and  not  indirect receipts in the form of drawn up of part of the Excise  Duty and  rebate  on railway freight, which are  in  reality  not subsidies  but concessional rate of Excise Duty and  railway freight.   This  means that item 1, i.e., the  subsidy  paid decree   by  the  Government  should  be  deemed  to  be   a permissible deduction but not items 3 and 4. This  leaves  the  question  regarding items  2  and  5  for consideration.   Both these items are, of course,  cases  of cash  payment,  but  only  if  they  are  payments  by   the Government  or a Body Corporate established by any  law  for the   time  being  in  force  they  would   be   permissible deductions. As  regards the Joint Plant Committee the  Industrial  Court merely said that it appears to be a Government Body, and  at another  place that it appears to be a Body  constituted  by the Government.  A body constituted by the Government is not necessarily  a Government body.  We find from  the  brochure issued  by  the Joint Plant  Committee  regarding  Indenting Procedure and General Conditions of Sale for Iron and Steel, that  it  was  constituted  by  the  Central  Government  in exercise  of the powers conferred by Clause 17 of  the  Iron and  Steel (Control) Order 1956 to take over  the  functions previously  performed  by the Iron and Steel  Controller  in regard  to planning and distribution of indents and  rolling programmes.   It consisted of Iron and Steel  Controller  as Chairman  and one representative of each of the  main  steel plants,  the Tata Iron & Steel Co. Ltd., the Indian  Iron  & Steel  Co. Ltd., Hindustan Steel Ltd.,  Rourkela,  Hindustan Steel Limited.  Bhilai, Hindustan Steel Ltd., Durgapur,  and a  representative  of the Railway Ministry.   This  was  the result of the 133 decision  to  abolish over-all statutory  control  over  the prices  of the bulk of steel production and the decision  to entrust  freight equalisation to the Joint Plant  Committee. Clause  17 of the Iron and Steel (Control) Order 1956 is  as

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follows : "17.   Pawer of Central Government to give directions.   The Central  Government may give directions as to the  procedure to   be   followed   by  the   authorities   issuing   quota certificates,  permits  or written orders,  referred  to  in Clause  4 and 5. as to the maintenance by the Controller  of records in connection with the distribution of iron or steel and  generally  for  the purpose of  giving  effect  to  the provisions of this part." From  these  provisions it does not appear how  exactly  the funds  of the Joint Plant Committee are obtained and why  or how the Joint Plant Committee makes the payments of the kind in  question.  This is certainly not a Government Body.   It seems  to be more or less functioning on an informal  basis. It does not seem to have any statutory powers.  The decision of the Industrial Court that the cash paid by this Body is a deductible items cannot, therefore, be upheld. As  regards  the  payment made by the  Indian  Cotton  Mills Federation,  it  appears that the payment is made out  of  a fund  collected by it at the rate of Rs. 200/- per  bale  of imported  cotton.  It means, therefore, that  when  payments are made out of this fund the mill receiving that payment is in fact getting back either the whole or a substantial  part of  what  it has already paid, when  it  purchased  imported cotton.  That apart, this Federation cannot be said to be  a Body Corporate established by any law for the time being  in force.   It  may be a Body Corporate established  under  the Companies  Act because it is registered under the  Companies Act.   The  Payment  of Bonus Act, Section  2(9)  defines  a company as follows : "(9) ’company’ means any company as defined in section 3  of the  Companies  Act, 1956, and includes  a  foreign  company within the meaning of sec. 591 of that Act;" A  corporation  is defined in section 2 (11 ) as  "any  body corporate  established by or under any Central,  Provisional or  State  Act  but  does not include a  company  or  a  co- operative  society".   Now  it  will  be  noticed  that  the definition  of  the  term  ’corporation’  takes  in   bodies corporate  established  by law as well as  bodies  corporate established  under any law.  It cannot, therefore,  be  said that  ’when item 6(g) in the Second Schedule uses the  words ’body corporate established by any law’ it was not conscious of  the distinction between a body corporate established  by law  and a body corporate established under any  law.   This distinction has also been 134 noticed  in  the  decision of the High Court  of  Bombay  in Majoor  Sahkari  Bank Ltd. v. M. N. Majumdar &  Anr.(1)  tn. discussing this question the learned Judes said "But what, in our opinion , the notification contemplates is not  incorporation  under any law but by,  an,  Indian  law, which  means  that  A special  law  should  incorporate  the particular  company or association.  For instance we have  a Reserve Bank of India; we had an Imperial Bank of India;  we have now State Banks.  The Act itself incorporates the bank, association or society.  And the language used is clear.  It is   not   "incorporated  under  an  Indian  law";   it   is "incorporated by an Indian law".  But what appears to us  to be  fairly clear in the first part of the  notification  and when  we look at that it applies to the business of  banking companies registered under any of the enactments relating to companies  for  the  time being in force.   Now  the  object obviously was to apply this notification not to associations of less *than 10 persons who were doing business of  banking and  who  could  not  be incorporated  but  to  confine  the

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operation  of this notification to ten persons or  more  who could be, and would have to be registered, either under  the Indian  Companies   Act  or  some  other  Act  relating   to               companies." It  was  argued  by Mr. Gupte that under the  Act  bonus  is payable  by  a  "corporation" as well as  a  "company"  and, therefore, the words ’body corporate established by any law’ should   be  deemed  to  include  even  a   body   corporate established  under  any law i.e., even a  company.   But  it appears to us that the words ’body corporate established  by any  law’ have been deliberately used.  While all  companies and  corporations, as defined in the Act are liable  to  pay bonus. the intention seems to be that only subsidies paid by body corporate established by any law, should, be deductible items and not subsidies paid by bodies corporate established under any law.  The above decision of the Bombay High  Court referred  to  the Reserve Bank of India,  Imperial  Bank  of India   and  State  Banks.   There  are   bodies   corporate established by law like the Rubber Board, Coffee Board etc., which grant subsidies for replantation, rehabilitation  etc. The  idea  apparently  in  referring  to  a  body  corporate established  by any law was that  when bodies corporate  are established  by  any  law  for  the,,  specific  purpose  of encouraging  any  industry and they  grant  subsidies,  such subsidies alone should be taken into account.  We are of the opinion.  therefore.  that item 5 also is not  a  deductible item. (1) [1955] 2 L.L.J. 755. 135 This  leaves for decision the question whether the  sum  of Rs.  9,72,986 which relates to amounts received in the  year 1967  but relate to earlier years, can also be  deducted  or not.   In the view that we have taken that only item 1 is  a deductible  item, the amount involved is a small one of  Rs. 6,873  due for the year 1966 but received in the year  1967. We  are not able to agree with the contention on  behalf  of labour  that as the whole of the sum of Rs. 32.43  lacs  has been shown as item of income in the profit and loss  account of the mills the management cannot now contend that any part of  it cannot be deducted and that the whole of  the  amount should  be held to be profit available for  calculating  the bonus.  All that section 23 of the Act Provides is for  pre- sumption of the accuracies of the balance sheet and profits and  loss  account  of  corporations  and  COmpanies.    The correctness  has  been accepted by both  the  parties.   But whether any part of that amount should be held to fall under item  6  (g)  of the Second Schedule to the  Act  cannot  be decided  on the basis that it is shown as an income  in  the profit  and loss account or the balance sheet.  There is  no question  of estoppel here.  All the same we have  no  doubt that  amounts due for earlier years received in 1967  should also be deemed to be income for the year 1967.  Otherwise it means that such sums would not have been taken into  account in  the years for which they were due as also in  the  years when  they  were received.  Moreover. the accounts  in  this case  have been maintained on a cash basis  and,  therefore, the amounts received in the year 1967 should be deemed to be the income of that year though due in respect of an  earlier year.   We  may also refer to the decision  in  Consolidated Coffee Estate Ltd. v. Workmen(1) where it was held that even though  the  company had been paving bonus in  the  past  by negotiating with its employees, if it insisted that for  the year  in  question  it  would pay  in  accordance  with  the relevant  law  it  could not be prevented  from  having  its liability for bonus determined accordingly.

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In  the  result  the  appeals  of  the  Mills  Company   are dismissed.   The appeals of the Association are  allowed  in part  holding that item 2, i.e., the sums received from  the Joint  Plant Committee is not a deductible item and  item  I alone  will  be  a deductible item under item  6(g)  of  the Second  Schedule.  As the Association has succeeded in  five out  of six questions that had to be decided they  will  get their costs from the management.  The Industrial Court  will have  to re-calculate the bonus on this basis.  One  hearing fee. G. C. (1) [1970] 2 L.L.J. 576. 136