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PETITIONER: THE AHMEDABAD MISCELLANEOUSINDUSTRIAL WORKERS’ UNION

       Vs.

RESPONDENT: THE AHMEDABAD ELECTRICITY CO.  LTD.

DATE OF JUDGMENT: 28/07/1961

BENCH: WANCHOO, K.N. BENCH: WANCHOO, K.N. GUPTA, K.C. DAS

CITATION:  1962 AIR 1255            1962 SCR  (2) 934  CITATOR INFO :  RF         1967 SC 691  (11)  RF         1969 SC 530  (3)  RF         1972 SC  70  (21,22,23)  R          1972 SC 330  (7)

ACT: Bonus-Payable  by electricity  company-Depreciation-Mode  of calculation-Indian-Income-tax  Act (11 of 1922),  Rules-Sch. VII-Electricity (Supply) Act, 1948 (54 of 1948).

HEADNOTE: The  respondent, which is an electricity company,  contested the claim of the appellant for three months’ wages as  bonus on the ground that if calculation was made on the Full Bench Formula  evolved  by  the  Labour  Appellate  Tribunal   and approved  by this Court in the Associated  Cement  Companies Ltd. v. Its Workmen, (1959) S. C. R. 925, there would be  no surplus  available  to pay the bonus.   The  question  which arose for decision was whether depreciation should be calcu- lated according to the provisions of Income-tax Act and the                     935 rules framed thereunder or in accordance with the provisions of  the  Seventh Schedule to the Electricity  (Supply)  Act, 1948. Held,  that  the  Income-tax  rules  should  be  applied  in calculating  depreciation  under the Full Bench  formula  in preference to the provisions of the Seventh Schedule to  the Electricity  (Supply)  Act,  1948  even  in  the  cases   of electricity companies. U.P.  Electric Supply Company Ltd. v. Their  Workmen  (1955) (2)  L.  L.  J.  43 1, Shree Meenakshi  Mills  Ltd.  v.  The Workmen, (1958) S.C.R. 878 and Tinnevelly Tuticorin Electric Supply Co. v..Its Workmen, (1960) 3 S.C.R. 68, considered. The Mill Owners Association v. Rashtriya Mill Mazdoor  Sang, Bombay, (1950) 2 L. L. J. 1247, referred to.

JUDGMENT: CIVIL APPELLATE JURISDICTION : Civil Appeal No. 479 of 1960. Appeal  by  special leave from the Award  dated  August  13, 1959, of the Industrial Court Bombay in Ref. (f.C.) No.  159

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of 1957. C.T.  Daru,  L.  Udayarathnam and S.S.  Shukla,  for  the appellant, D.Vimadalal, J. B. Dadachanji, Revinder Narain and O.  C. Mathur for the respondent. 1961.  July 28.  The Judgment of the Court was delivered by WANCHOO,  J.-This  is  an  appeal by  special  leave  in  an industrial   matter.    The  appellant  is   the   Ahmedabad Miscellaneous  Industrial  Workers’ Union, and  the  dispute which  went  for adjudication before  the  Industrial  Court Bombay was with respect to bonus for the year ending Septem- ber  1956.  The appellant claimed that three months I  wages should  be awarded as bonus by the respondent, which is  the Ahmedabad  Electricity Company Limited.  The  contention  of the  respondent  was  that  if a  calculation  was  made  in accordance with the Full Bench Formula evolved by the Labour Appellate Tribunal and approved 936 by this Court in the Associated Cement Companies Ltd. v. Its Workmen (1), there would ’be no available surplus from which any  bonus could be awarded.  The Industrial Court  accepted the  contention  of the respondent and rejected  the  appel- lant’s  claim.   The main dispute in  the  Industrial  Court centred on three points namely-       (i)   whether  depreciation  should  be   cal-       culated  according  to the provisions  of  the       Income-tax Act and the rules framed thereunder       or in accordance with the provisions contained       in  the  Seventh Schedule to  the  Electricity       (Supply) Act, No. LIV of 1918       (ii)whether any deduction should be allowed as       a  prior charge towards contingencies  reserve       created  under the Electricity (Supply) Act  ;       and       (iii)whether  any deduction should be  allowed       on account of income-tax. The  Industrial Court held against the appellant on all  the three  points and found that there was no available  surplus from which any bonus could be awarded.  Hence this appeal by special leave. It   is  not  in  dispute  between  the  parties   that   if depreciation  is  calculated in accordance  with  the  rules framed under the Income-tax Act, there will be no  available surplus,  from  which  bonus could  be  awarded.   The  main question  therefore  that arises in this appeal  is  whether depreciation  should  be calculated according to  the  Rules framed  under the Income-tax Act or in accordance  with  the Seventh  Schedule to the Electricity (Supply) Act.  If  this question  is  decided  against the appellant.  it  would  be unnecessary  to  decide the other two points  on  which  the parties were at variance in the Industrial Court. (1)  (1959) S.C.R. 925. 937 What   depreciation  should  be  allowed  in  the  case   of electricity companies came lip for consideration before  the Appellate  Tribunal  in 1955 in the case of U.  P.  Electric Supply Company Ltd. v. Their Workmen (1), and it was pressed before  it  that  in  the  case  of  electricity   companies depreciation  should be deducted in the manner specified  in the  Seventh Schedule to the Electricity (Supply) Act.   The Appellate  Tribunal  pointed out that in the  long  run  the result  of the application of the two methods would  be  the same  ; but it preferred to give as prior charge  income-tax depreciation  as  it  was in keeping  with  the  Full  Bench formula  and  was not likely to raise  fresh  problems.   It

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appears  that since then, as pointed out by  the  Industrial Court,  various  Industrial  Tribunals  have  been  allowing depreciation  according  to  the income-tax  rates  and  not according  to  the  Seventh  Schedule  to  the   Electricity (Supply) Act in the case of electricity companies also.  The U.P.  Electric  Supply  Company’s  case  (1)  came  up   for consideration before this Court in The Shree Meenakshi Mills Ltd. v. Their Workmen (2) and was approved.  This Court then approved the decision of the Appellate, Tribunal disallowing initial   and   additional   depreciation   in   calculating depreciation  for  purposes of the Full  Bench  formula  but accepted  that  depreciation according to  income-tax  rates should  be deducted.  It is true that The  Meenakshi  Mill’s case  ( 2) was not dealing with an electricity  company  and this  Court  did  not have occasion to  consider  the  point directly ; even so, this Court approved the decision in  the U.  P.  Electric Supply Company’s case (1) with  respect  to depreciation  and  could not have been unaware of  the  fact that the Appellate Tribunal had applied the income-tax rules for  purposes  of depreciation to electricity  companies  in preference (1)  (1955) 2 L. L. J. 431. (2)  (1958) S. C. R. 878. 938 to the provisions of the Seventh Schedule to the Electricity (Supply) Act. Further in The Tinnevelly-Tutcorin Electric Supply Co.  Ltd. v.  Its  Workmen (1), this Court dealt with the case  of  an electricity  company  directly.   It had  then  occasion  to consider the U. P. Electric Supply Company’s case (2)  again and pointed out that that case decided two questions of law. The  first  was in regard to the applicability of  the  Full Bench  formula to electricity companies, and the second  was with  respect to the extent of statutory depreciation to  be allowed  under the Full Bench Formula.  It was  pointed  out that  the decision on the second point by which the  income- tax  rules  were  applied for purposes  of  depreciation  to electricity  companies  with the exception  of  initial  and additional  depreciation was approved by this Court  in  the Meenakshi  Mill’s  case (3).  It is again true that  in  the Tinnevelly-Tuticorin Electric Supply Company’s case (1)  the question   whether   depreciation  should  be   allowed   in accordance  with the income-tax rules or under  the  Seventh Schedule to the Electricity (Supply) Act for the purposes of the  Full  Bench formula was not directly raised  ;  but  in effect  the decision in the U. P. Electric Supply  Company’s case  (2)  where  the Appellate  Tribunal  had  applied  the income-tax  rules  of  depreciation  in  preference  to  the provisions  of  the  Seventh Schedule  to  the’  Electricity (Supply)  Act, was approved.  In the circumstances it  seems to  us  that it is not open to the appellant  to  raise  the question that the provisions of the Seventh Schedule to  the Electricity  (Supply) Act should be applied for purposes  of calculating  depreciation  in preference to  the  income-tax rates in working out the Full Bench formula. (1) (1960) 3 S. C. R. 68.    (2) (1955) 2 L.L.J. 431. (3) (1958) S.C.R. 878.      (4) (1960) 3 S.C.R.68. 939 But, assuming that the question is still open because it was never  directly  raised  in  this  Court  and   specifically decided, we are of opinion that the income-tax rules  should be applied in working out depreciation under the Full  Bench formula  in  preference  to the provisions  of  the  Seventh Schedule  to the Electricity (Supply) Act.  It  was  pointed out  in Tinnvelly Tuticorin ElectriG Supply Co.’s  case  (1)

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that   the  provisions  in  the  Electricity  (Supply)   Act contained  in s. 57 and the Sixth and Seventh  Schedules  to the Act were for a special purpose, namely, to work out  the charges  to  be recovered from consumers for the  supply  of electricity.   It was also observed that the  provisions  of the  Electricity (Supply) Act and its Schedules  were  meant for  operation in the field covered by the Act and that  the principles of industrial adjudication were wholly  different and had to be worked out in their own way in the  industrial field.   It  seems  to us therefore  that  in  working,  out available  surplus according to the Full Bench formula,  the same  principle  with  respect  to  depreciation  should  be applied in the case of electricity companies as in the  case of   all  other  industrial  concerns.   As  the   Appellate ".Tribunal pointed out, the result in the long run would. be the  same, though there might be difference in  some  years. Besides, in the formula when it was evolved in 1950 (see The Mill-Owners’ Association v. The Rashtriya Mill Mazdoor Sangh Bombay(2),  the depreciation intended to be allowed was,  as provided in the rules under the Income-tax Act.  The  Appel- late Tribunal pointed this out in the U. P. Electric, Supply Compan’s  case (3) and said the Full Bench  formula  allowed depreciation  according to incometax rates.  It seems to  us therefore  that  in  the field of  industrial  relations  in connection with which the Full Bench formula was evolved (1)  (1960) 3 S. C. R. 68. (2) (1930) 2 L. L. J. 1247. (3)  (1955) 2 L. L. J. 431. 940 it is proper that the formula should be worked out as it was evolved  without injecting into it the provisions  contained in  the  Seventh Schedule to the Electricity  (Supply)  Act. This will work for ’uniformity in all industrial concerns  ; and as pointed out in the Associated Cement Companies’  case "the  formula had on the whole worked fairly  satisfactorily in  a large number of industries all over the  country,  and the  claim for bonus should be decided by tribunals  on  the basis of this formula without attempting to revise it".   If the  provisions of the Seventh Schedule to. the  Electricity (Supply) Act which, as we have pointed out, were evolved for a  special purpose, were to be injected into  this  formula, the  result would be that electricity companies would  stand in a group by themselves when compared with other industrial concerns,  and the uniformity that the formula had  achieved in the matter of bonus would be destroyed.  The  consequence then  will  be  that  in  identical  situations  electricity companies  may  have  to pay bonus  while  other  industrial concerns to which income-tax rates of depreciation would  be applied may not have to do so.  It seems to us that this  is not   desirable,   particularly  when   we   remember   that electricity companies are public utility companies. Another  reason  why  we  think  that  income-tax  rates  of depreciation should be applied for the purposes of the  Full Bench  formula in the case of electricity companies also  is that  income-tax rates provide for a quicker building up  of the depreciation fund.  This to our mind is all to the  good in the case of public utility companies like those providing electricity so that they may be in a position to have  funds at  their  disposal  in  case  of  unforeseen   difficulties resulting in the necessity of replacing plant and  machinery earlier than what is provided under the Seventh Schedule  to the Electricity (Supply) Act. (1)  (1959) S. 0, R. 925. 941 There is yet another reason which inclines us to approve the view  taken by the Appellate Tribunal in the U. P.  Electric

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Supply’Company’s  case  (1).  That case settled the  law  in 1955 and has since been followed throughout the country.  We feel that we should not disturb that decision, unless  there are good reasons for doing so and none I has been shown.  If anything,  it  appears to us that this is not  the  time  to disturb that decision which has now been followed throughout the  country for the last six years, for the whole  question of  bonus  is under reference to a  high-powered  commission which ,",ill go into the matter afresh and will  necessarily consider  the  question of the revision of  the  Full  Bench formula.  As this Court pointed out in the Associated Cement Company’s  case (2), the problem raised by the  question  of the  revision  of  the  Full Bench  formula  is  of  such  a character that it could only be considered by a high-powered commission.   That is now being done and it seems to  us  in the  circumstances that we should not disturb  the  decision arrived  at by the Appellate Tribunal in the U. P.  Electric Supply Company’s case (1) on this question. It follows therefore that the Industrial Court was right  in allowing   depreciation   in  accordance  with   the   rates prescribed under the Rules framed under the Income-tax  Act. As we have already pointed out, if that is done, there  will be no available surplus in this case, from which bonus could be  awarded.   In  the  circumstances we  do  not  think  it necessary  to  decide the other two points relating  to  the contingencies  reserve  and income-tax,  which  were  raised before the Industrial Court.  The appeal fails and is hereby dismissed.   In  the circumstances we pass no  order  as  to costs. Appeal dismissed. (1)  (1955) 2 L.L.J. 431. (2)  (1959) S.C.R. 925. 942